Analysis of the Impact of ST Nuotai's Financial Fraud Incident on Nanjing Securities

Based on the currently collected public information, the financial fraud incident of ST Nuotai (Nuotai Biotech, 688076.SH) mainly involves penalties against the listed company itself, its actual controllers, and executives. However, regarding the direct impact on Nanjing Securities as the sponsor institution, there is no clear disclosure of penalties or regulatory measures in the existing public information.

In December 2021, ST Nuotai transferred pharmaceutical technology and marketing authorization holder rights to Zhejiang Huabei Pharmaceutical, recognizing 30 million yuan in business income. Regulatory authorities determined that this transaction had no commercial substance—Zhejiang Huabei had neither the ability to pay nor the actual application capacity, and the source of funds formed a closed loop (the technology transfer payment ultimately came from ST Nuotai’s own capital increase). This behavior led to an overstatement of operating income by 30 million yuan and an overstatement of total profit by 25.9516 million yuan in the 2021 annual report, accounting for 20.64% of the disclosed total profit in the current period[1][2].

The China Securities Regulatory Commission (CSRC) and the Shanghai Stock Exchange (SSE) imposed a total fine of 76.2 million yuan on ST Nuotai and 6 then-serving executives including actual controller Zhao Dezhong. The company’s stock has been subject to other risk warnings since July 2024, and its securities abbreviation was changed to “ST Nuotai”. The SSE also determined that the actual controller is unfit to serve as a director, supervisor, or senior executive of a listed company for three years, and will not accept ST Nuotai’s application documents for issuance and listing within five years[1][2].

From the perspective of the sponsor institution’s responsibilities, this incident may have the following potential impacts on Nanjing Securities:

ST Nuotai is a Sci-Tech Innovation Board (STAR Market) listing project sponsored by Nanjing Securities. The occurrence of major financial fraud in the first year of listing will have a negative impact on Nanjing Securities’ professional reputation and brand credibility, possibly affecting subsequent business expansion and customer trust.

Although current public information does not show Nanjing Securities being directly punished, according to the regulatory orientation of the new “Nine National Regulations” that strengthens the responsibilities of intermediary institutions, regulatory authorities may conduct inspections on whether the sponsor institution has performed its duties diligently. If the inspection finds that the sponsor institution has failed to perform its duties properly, it may face regulatory measures or administrative penalties.

This incident may lead to Nanjing Securities facing stricter regulatory scrutiny in its STAR Market sponsorship business, possibly higher project review standards, and longer review cycles.

According to relevant judicial interpretations of the Supreme People’s Court, if the sponsor institution is at fault, it may need to bear joint and several liability for investors’ losses.

From the existing public information, the direct impact of ST Nuotai’s financial fraud incident on Nanjing Securities has not been clearly reflected, but this incident undoubtedly poses potential business risks and reputational risks to Nanjing Securities. In the follow-up, it is necessary to pay attention to whether regulatory authorities will pursue the sponsor institution’s responsibilities and the rectification measures that Nanjing Securities may take.

Investors should continue to pay attention to the regulatory authorities’ further determination of the sponsor institution’s responsibilities, as well as Nanjing Securities’ official response to this incident and related rectification measures.

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[1] NetEase Finance - “ST Nuotai: Such transactions are identified as financial fraud, should Nanjing Securities be punished together?”
(https://www.163.com/dy/article/KHP8DS1505568W0A.html)

[2] NetEase Finance - “Nuotai Biotech’s financial fraud penalty ‘lands’ after inflating income in the first year of listing”
(https://www.163.com/dy/article/KHH29KV105568W0A.html)