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

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On March 29, Wuhan Sante Cableway (Rights Protection) Group Co., Ltd. (Sante Cableway, 002159.SZ) announced that the company and relevant responsible individuals have received the “Advance Notice of Administrative Penalty.”

The announcement showed that on March 27, the company’s former actual controller Ai Luming, as well as Lu Sheng, Zhang Quan, Wang Lili, and Zhang Yunyun, received the “Advance Notice of Administrative Penalty” issued by the Hubei Securities Regulatory Bureau of the China Securities Regulatory Commission (CSRC), indicating that the investigation regarding the alleged information disclosure violations involving Sante Cableway and Ai Luming has been completed and administrative penalties will be imposed.

Previously, on August 8, 2023, Sante Cableway announced that due to suspected information disclosure violations, the CSRC decided to file a case against the company and Ai Luming.

The content of Sante Cableway’s announcement on March 27 indicated that during the period involved in the case, the controlling shareholder was Wuhan Contemporary Urban Construction Development Co., Ltd. (hereinafter referred to as “Contemporary Urban Construction”), which is 100% controlled by Wuhan Contemporary Technology Industry Group Co., Ltd. (hereinafter referred to as “Contemporary Group”). Therefore, Contemporary Group is the indirect controlling shareholder of Sante Cableway during the period involved in the case and is also an affiliated legal entity of Sante Cableway.

Since 2019, due to the funding needs of the indirect controlling shareholder Contemporary Group, Sante Cableway has transferred funds to the designated recipient specified by Contemporary Group, with the funds ultimately going to Contemporary Group and its related parties and partners, resulting in non-operating fund occupation by related parties.

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

In addition, the company’s 2019 annual report and 2020 annual report had significant omissions. In 2019, Sante Cableway had a non-operating fund occupation of 1.423 billion yuan with the indirect controlling shareholder Contemporary Group, accounting for 133.49% of the net assets recorded in Sante Cableway’s 2019 annual report, with an occupied balance of 0 at the end of the year. In 2020, Sante Cableway had a non-operating fund occupation of 370 million yuan with the indirect controlling shareholder Contemporary Group, accounting for 25.59% of the net assets recorded in the 2020 annual report, with an occupied balance of 0 at the end of the year. Sante Cableway should have disclosed related party transactions and non-operating fund occupation matters in the relevant annual reports. Sante Cableway did not disclose the above matters in the 2019 annual report and the 2020 annual report, resulting in significant omissions in both reports. The non-operating fund occupation situation from 2019 to 2022 was disclosed only on April 30, 2022, in the announcement of Sante Cableway regarding the reply to the Shenzhen Stock Exchange’s inquiry letter. As of April 2022, Sante Cableway had fully recovered the occupied funds and interest from Contemporary Group.

The Hubei Securities Regulatory Bureau believes that the actions of Sante Cableway, Ai Luming, and other responsible individuals are suspected of violating relevant provisions of the Securities Law, constituting illegal behavior.

The Hubei Securities Regulatory Bureau decided, based on the facts, nature, circumstances, and social harm of the parties’ illegal actions, to impose a warning and a fine of 10.5 million yuan on Wuhan Sante Cableway Group Co., Ltd. for failing to timely disclose related party transaction matters, and to issue warnings and fines of 3 million yuan to Lu Sheng (Chairman of Sante Cableway from June 2017 to May 2020), 4.5 million yuan to Zhang Quan (President of Sante Cableway from November 2018 to May 2020, and Chairman during the period involved), 2.5 million yuan to Wang Lili (President of Sante Cableway from May 2020 to the period involved), and 2.6 million yuan to Zhang Yunyun (Chief Accountant of Sante Cableway from March 2017 to the period involved). Ai Luming was fined 11 million yuan.

In addition, Ai Luming, as the actual controller of Sante Cableway, directed Sante Cableway to engage in the illegal acts related to the case, which were severe in circumstances and behavior. Furthermore, Ai Luming had previously been subject to securities market entry ban measures by the Hubei Securities Regulatory Bureau within five years. According to relevant legal provisions, the Hubei Securities Regulatory Bureau intends to decide to impose a lifetime securities market entry ban on Ai Luming. From the date of the decision announced by the Hubei Securities Regulatory Bureau, during the ban period, he shall not continue to engage in securities business, securities service business, or serve as a director, supervisor, or senior management of the original securities issuer, nor engage in securities business, securities service business, or serve as a director, supervisor, or senior management of any other securities issuer in any other institution.

The announcement also indicated that according to the findings in the “Advance Notice of Administrative Penalty,” Sante Cableway did not trigger the circumstances for mandatory delisting due to major illegal acts as specified in Section 5, Chapter 9 of the “Shenzhen Stock Exchange Listing Rules (2025 Revision),” nor did it trigger other risk warning circumstances.

Sante Cableway stated that the company expects to face corresponding administrative penalties and fines. The specific amount of the fines will be reflected in the company’s current profit and loss according to the final decision, which will have a direct impact on the company’s current profits. The company will timely fulfill its information disclosure obligations based on the progress of the matter. In addition, the non-operating fund occupation matters of the original controlling shareholder involved in the “Advance Notice of Administrative Penalty” have been fully returned in cash as of April 2022.

Sante Cableway also stated that as of the date of this announcement, all production and operational activities of the company are normal, and the above matters will not have a significant impact on the company’s production and operations. The company’s board of directors expresses sincere apologies to the vast number of investors regarding this matter. The company and relevant personnel will seriously learn from the experience, improve internal control systems, enhance corporate governance levels, strictly comply with relevant legal and regulatory requirements, continuously improve the quality of information disclosure, and fulfill the information disclosure obligations truthfully, accurately, completely, timely, and fairly, safeguarding the interests of the company and its shareholders.

As of the close of A-shares on March 27, Sante Cableway’s stock price was 19.18 yuan/share, up 0.16%.