Santai Cableway: Investigation into information disclosure violations completed; the company was fined 10.5 million yuan

On March 29, Wuhan Santrailway Group Co., Ltd. (Wuhan Santrailway, 002159.SZ) released an announcement regarding the company and relevant persons receiving a 《Notice of Pre-Administrative Penalty》（《行政处罚事先告知书》）.

According to the announcement, on March 27, the company’s former actual controller, Ai Minglu, as well as Lu Sheng, Zhang Quan, Wang Lili, and Zhang Yunyun, received the 《Notice of Pre-Administrative Penalty》 issued by the Hubei Office of the China Securities Regulatory Commission (CSRC). Regarding the case involving Wuhan Santrailway and Ai Minglu for alleged violations of information disclosure laws and regulations, the investigation has been completed, and an administrative penalty will be imposed.

Previously, on August 8, 2023, Wuhan Santrailway announced that, as it was suspected of violating information disclosure laws and regulations, the CSRC decided to file a case against the company and Ai Minglu.

The content of Wuhan Santrailway’s March 27 announcement shows that during the period involved in the case, the controlling shareholder was Wuhan Contemporary Urban Construction and Development Co., Ltd. (hereinafter referred to as “Contemporary Urban Construction and Development”). Wuhan Contemporary Technology Industry Group Co., Ltd. (hereinafter referred to as “Contemporary Group”) held 100% of Contemporary Urban Construction and Development, so during the period involved in the case, Contemporary Group was the company’s indirect controlling shareholder and also an associated legal entity of Wuhan Santrailway.

Since 2019, due to the funding needs of the indirect controlling shareholder, Contemporary Group, Wuhan Santrailway transferred funds into the payment entity designated by Contemporary Group. The funds ultimately flowed to Contemporary Group and its affiliates and co-operation partners, resulting in non-operating funds being occupied by related parties.

Among them, from August 3, 2020 to December 2020, Wuhan Santrailway failed to disclose in a timely manner the amount of funds transferred to the indirect controlling shareholder, Contemporary Group, which was 340 million yuan, accounting for 31.89% of the net assets audited in the most recent period. In 2021, Wuhan Santrailway failed to disclose in a timely manner the amount of funds transferred to Contemporary Group, which was 1.904 billion yuan, accounting for 131.67% of the net assets audited in the most recent period. In January 2022, Wuhan Santrailway failed to disclose in a timely manner the amount of funds transferred to Contemporary Group, which was 500 million yuan, accounting for 34.58% of the net assets audited in the most recent period.

In addition, Wuhan Santrailway’s 2019 annual report and 2020 annual report contained material omissions. In 2019, Wuhan Santrailway and its indirect controlling shareholder, Contemporary Group, had non-operating funds being occupied amounting to 1.423 billion yuan, accounting for 133.49% of the net assets recorded in Wuhan Santrailway’s 2019 annual report, and the occupied balance at year-end was 0. In 2020, Wuhan Santrailway and its indirect controlling shareholder, Contemporary Group, had non-operating funds being occupied amounting to 370 million yuan, accounting for 25.59% of the net assets recorded in Wuhan Santrailway’s 2020 annual report, and the occupied balance at year-end was 0. Wuhan Santrailway should have disclosed related-party transactions and the non-operating funds occupation by related parties in the relevant annual reports. Wuhan Santrailway did not disclose the above matters in its 2019 annual report and 2020 annual report, which resulted in material omissions in its 2019 annual report and 2020 annual report. The non-operating funds occupation by related parties from 2019 to 2022 was disclosed up to April 30, 2022 in the 《Wuhan Santrailway Group Co., Ltd. Announcement on the Reply to the Shenzhen Stock Exchange Inquiry Letter》（《武汉三特索道集团股份有限公司关于对深圳交易所关注函回函的公告》）. As of April 2022, Wuhan Santrailway had fully recovered the funds occupied by Contemporary Group and the related interest.

The Hubei Office of the CSRC believes that the actions of Wuhan Santrailway, Ai Minglu, and other relevant persons in Wuhan Santrailway are suspected of violating the relevant provisions of the 《Securities Law》, constituting illegal conduct.

The Hubei Office of the CSRC has decided that, based on the facts, nature, circumstances, and the level of social harm of the illegal conduct of the parties, with a comprehensive consideration of Wuhan Santrailway’s failure to timely disclose related-party transaction matters, as well as the behavior of Wuhan Santrailway in causing material omissions in its 2019 annual report and 2020 annual report, it has decided as follows: to issue a warning to Wuhan Santrailway Group Co., Ltd., and impose a fine of 10.5 million yuan; to issue a warning to Lu Sheng (serving as chairman of Wuhan Santrailway from June 2017 to May 2020), and impose a fine of 3 million yuan; to issue a warning to Zhang Quan (serving as president of Wuhan Santrailway from November 2018 to May 2020, and serving as chairman of Wuhan Santrailway from May 2020 to the period involved in the case), and impose a fine of 4.5 million yuan; to issue a warning to Wang Lili (serving as president of Wuhan Santrailway from May 2020 to the period involved in the case), and impose a fine of 2.5 million yuan; to issue a warning to Zhang Yunyun (chief financial officer of Wuhan Santrailway from March 2017 to the period involved in the case), and impose a fine of 2.6 million yuan; and to impose a fine of 11 million yuan on Ai Minglu.

In addition, as Ai Minglu was the acting actual controller at the time of the conduct, he instigated Wuhan Santrailway to engage in the relevant illegal conduct involved in the case. His conduct was egregious, and the illegal circumstances were serious. Moreover, within the past five years, Ai Minglu had previously been subject to a securities market ban by the Hubei Office of the CSRC. Based on relevant laws and regulations, the Hubei Office of the CSRC intends to decide: to impose a lifelong securities market ban on Ai Minglu. From the date the Hubei Office of the CSRC announces the decision, during the period of the ban, in addition to not being allowed to continue to engage in securities business or securities service business at the original institution, or to serve as a director, supervisor, or senior management officer of the original securities issuer, he also shall not engage in securities business or securities service business, or serve as a director, supervisor, or senior management officer of any other securities issuer, at any other institution.

The announcement also shows that, according to the determination in the 《Notice of Pre-Administrative Penalty》, Wuhan Santrailway has not been found to fall under the circumstances of major illegal forced delisting specified in Chapter 9, Section 5 of the 《Shenzhen Stock Exchange Stock Listing Rules (2025 Revised)》（《深圳证券交易所股票上市规则（2025年修订）》）, nor does it fall under any other circumstances for risk warnings.

Wuhan Santrailway stated that the company expects to face the corresponding administrative penalties and fines. The specific fine amount will be recorded in the company’s profit or loss for the current period based on the final decision, which will have a direct impact on the company’s profit for the current period. The company will timely fulfill its information disclosure obligations in accordance with the progress of the matter. In addition, regarding the non-operating funds occupation by the former controlling shareholder involved in the 《Notice of Pre-Administrative Penalty》, the related occupied principal and interest were fully repaid in cash in April 2022.

Wuhan Santrailway also said that, as of the date of disclosure of this announcement, all of the company’s production and operating activities are operating normally, and the above matters will not have a material impact on the company’s production and operations. The board of directors of the company extends its sincere apologies to the broad group of investors for this matter. The company and relevant personnel will seriously draw lessons from the experience and improve internal control systems, enhance the company’s corporate governance level, strictly comply with relevant laws and regulations, continuously improve the quality of the company’s information disclosure, and faithfully and in a timely, fair, true, accurate, complete manner fulfill its information disclosure obligations, in order to safeguard the interests of the company and its shareholders.

As of the A-share market close on March 27, Wuhan Santrailway was at 19.18 yuan per share, up 0.16%.

（Source: The Paper (澎湃新闻)）