Jul 11, 2020 05:24 AM

GF Securities Penalized for Role in Kangmei’s $12.6 Billion Fraud


What’s New: A brokerage house became the latest target for punishment over involvement in the $12.6 billion financial fraud of drugmaker Kangmei Pharmaceutical Co. Ltd.

GF Securities Co. Ltd. was banned from the securities-sponsor business for six months and from bond underwriting for a year, the China Securities Regulatory Commission (CSRC) said Friday in a statement.

The regulator also proposed that 8 people at the Shenzhen- and Hong Kong-listed brokerage are not suitable as candidates for their positions in investment banking for 10 to 20 years, and 6 people are taken public condemnation or other regulatory actions. These individuals were also ordered to disgorge their compensation except for basic salaries to the company.

The CSRC didn’t disclose the names of the 14 people, but Caixin learned from exclusive sources that GF Securities recently replaced the head of its investment banking business and three assistants to the general manager.

The background: Kangmei, one of the country’s biggest listed drugmakers, was accused of financial reporting fraud involving 88.6 billion yuan ($12.6 billion) of overstatements between 2016 and 2018. It was fined 600,000 yuan ($84,600) in May by top securities regulators for inflating revenues and fabricating bank deposits.

GF Securities was the sponsor of Kangmei’s initial public offering in 2001. Since then, the brokerage has helped with at least a dozen of the drugmaker’s financing deals.

Lin Zhihai, the former general manager of GF Securities, resigned in April citing health reasons. But several sources familiar with the matter told Caixin that Lin resigned over his accountability for issues related to Kangmei’s fraud case.

Quick Takes are condensed versions of China-related stories for fast news you can use. To read the full story in Chinese, click here.

Contact reporter Denise Jia ( and editor Bob Simison (

Related: Former Kangmei Chairman Taken Into Police Custody

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