Rich bird debt after Wuyang case: false statement case opens two weeks later, KPMG is claimed 88 million yuan

Eight days after the first trial of the “Wuyang debt” Securities Misrepresentation liability dispute case was decided, the hearing time of a lawsuit involving KPMG Huazhen accounting firm (special general partnership) (hereinafter referred to as “KPMG Huazhen”) was finally finalized. On January 8, Shanghai Hesheng Asset Management Co., Ltd. (hereinafter referred to as “Hesheng asset”) received a civil summons from Beijing Second Intermediate People’s Court (hereinafter referred to as “Beijing Second Intermediate People’s court”). According to the subpoena, at 14:00 on January 27, 2021, the dispute over liability for Securities Misrepresentation of Hesheng assets as the plaintiff will be tried online on the electronic litigation platform of Beijing Internet court. < / P > < p > the case has lasted more than half a year since Hesheng assets sued KPMG Huazhen for a claim of 88 million yuan by fund managers including Jinyuan Shunan fund, Chang’an fund and China CITIC construction investment fund at the end of June 2020. During the period, it experienced several back and forth, such as the confirmation of the court session, KPMG Huazhen’s objection to jurisdiction, the ruling of Beijing Second People’s court rejecting, the appeal, and the ruling of Beijing Higher People’s court rejecting. < / P > < p > professionals told China Business Daily that the first trial judgment of “Wuyang debt” provided a reference for the local court in hearing relevant cases. Although the cases were different, it at least alleviated the concerns of the court judgment. Therefore, the trial of Securities Misrepresentation related cases may be accelerated. < / P > < p > “on January 8, four institutions formally received subpoenas and filed lawsuits, but at present, the court only received the case materials returned by the two institutions after the second instance ruling of” jurisdictional objection “, so the court first arranged the hearing of Hesheng assets and Jinyuan Shunan fund v. KPMG Huazhen.” Partner of Huiye law firm and lawyer of Hesheng asset. < / P > < p > according to the introduction, Hesheng assets filed a lawsuit to Beijing Second People’s Court on behalf of bondholders of four “14 rich birds”, the defendant of which is KPMG Huazhen. After receiving the materials, Beijing Second People’s court officially put the case on file, and directly arranged to hold a court session on September 9, 2020. < / P > < p > after receiving the litigation materials, KPMG Huazhen filed a jurisdictional objection, demanding that the case be transferred to Shanghai financial court. This makes it impossible for the first court session originally scheduled for September 9, 2020 to proceed, and the court needs to deal with the issue of jurisdiction first. < / P > < p > according to the court ruling, KPMG Huazhen’s main reason is that the place where the Securities Misrepresentation in this case is implemented and the result occurs is Shanghai, so the Shanghai financial court has jurisdiction over this case; the Shanghai financial court has tried the bond dispute cases involving the same bond issuance behavior, which is conducive to the timely and orderly resolution of the bond dispute And the unity of the judgment scale. < / P > < p > the Beijing Higher People’s court held that KPMG, the defendant of this case, was domiciled in Dongcheng District of Beijing, so the court with jurisdiction in Dongcheng District of Beijing has jurisdiction over this case. The appeal was dismissed on December 2, 2020, and the case was transferred back to the Beijing Second People’s court. < / P > < p > professionals believe that after the first trial of the “Wuyang debt” case has been decided, it should be said that the financial tribunal of the national court system will have a clearer understanding of such cases, which will help to reduce the concerns in the trial and make a decision with a more positive attitude. After all, as the first case of liability dispute over securities misrepresentation, the trial result of the “Wuyang debt” case must be approved Stand the test of history. According to the judgment of the industry, there is a tendency for the judiciary to assist in the rectification of the financial market. < / P > < p > the reporter noticed that shortly after Hesheng assets and others filed a lawsuit against KPMG Huazhen, China Securities Regulatory Commission imposed an administrative penalty on Fuguiniao Co., Ltd. (hereinafter referred to as “Fuguiniao”), the issuer of “Fuguiniao debt”. < / P > < p > according to the punishment decision issued on July 13, 2020, the CSRC has investigated and tried the illegal behaviors of Fuguiniao’s information disclosure and the use of raised funds. It is found out that Fuguiniao, the party concerned, has such illegal facts as “false records, major omissions in the information disclosure of the public issuance of corporate bonds, and failure to disclose the relevant periodic reports within the specified time”. < / P > < p > according to the analysis of professionals, the identification of “false statement” by the regulatory authorities means that the issuer must bear the relevant responsibility. At the same time, in the process of bond issuance, KPMG Huazhen was not diligent as an audit institution. Moreover, the previous punishment of KPMG Huazhen by the regulatory authorities also cross confirms this point. < / P > < p > in September 2018, Fujian securities regulatory bureau of China Securities Regulatory Commission (CSRC) issued warning letters to KPMG Huazhen and four certified public accountants due to the letter problem. According to the letter of decision, KPMG Huazhen and four certified public accountants did not implement letter certification in the course of auditing Fuguiniao’s 2014 and 2015 corporate bond financial statements, and did not explain the reasons for the lack of letter certification in the audit working paper. < / P > < p > “this is the first regulatory punishment for the four major international accounting firms after they entered China, which is a precedent.” According to the analysis of the person in charge of the fixed income Department of a securities company, if it is just a general letter problem, obviously the supervision will not be so aggressive. < / P > < p > “but because the issuer is bankrupt, it is meaningless to claim liability from the issuer again. Therefore, investors will naturally turn their attention to intermediary agencies, and KPMG Huazhen does have problems. ” The person in charge said. < / P > < p > according to the above professionals, the litigation logic of the plaintiff is to treat the accounting firm as the joint and several liability and joint infringer of the false statement and require it to bear the responsibility. < / P > < p > some people say that KPMG Huazhen has fallen into the pit of the rich and noble bird. In 2018, it was punished by the regulatory authorities, which set a precedent for the “four major” cases. In March 2020, it was sued by Guoyuan Securities for compensation, and in June 2020, it was sued by Hesheng assets. < / P > < p > it is understood that Guoyuan securities filed a claim of 77 million yuan against KPMG Huazhen and other intermediaries, which was eventually rejected by the Beijing Higher People’s court. The reason is that the “prospectus” of Fuguiniao related bonds has agreed on an arbitration clause, and the dispute settlement shall be submitted to Shanghai International Economic and Trade Arbitration Commission for arbitration. < p > < p > and four institutions, including Hesheng assets, filed a lawsuit against KPMG Huazhen, claiming 88 million yuan. The reason is that the financial audit conclusions of KPMG Huazhen on Fuguiniao in 2014 and 2015 affect the judgment of bond investors on the solvency of the issuer, and they should be liable for the investment losses of bond investors. Relevant people of Hesheng assets said that KPMG Huazhen is likely to submit to the issuer and provide customized letter service, so the format letter was “castrated”, and many investors of rich bird bonds are reasonably skeptical. < p > < p > the scale of corporate bonds “14 Fuguiniao” and “16 fugui01” held by Hesheng assets and its products as investment consultants are 90 million yuan and 250 million yuan respectively. As “16 Fugui 01” is still in the process of arbitration, the lawsuit is only against “14 Fugui birds”. < p > < p > on July 15, 2020, the minutes of the National Forum on the trial of bond dispute cases by courts (hereinafter referred to as the minutes) officially came into effect, in which the responsibilities of intermediary service agencies were clearly identified. < / P > < p > “after the release of the minutes, it is obvious that the efficiency of the court in accepting such cases has been greatly improved.” More importantly, the minutes clarifies the responsibility of intermediary service agencies. For such cases of bond default, the court has a clearer basis for trial and gives bondholders more remedies. < / P > < p > Disclaimer: the purpose of this article reprinted by CNFC is to convey more information, and it does not represent the opinions and positions of CNFC. The content of this article is for reference only, and does not constitute an investment proposal. Investors operate on this basis at their own risk. < p > < p > Chinanet is a state key news website under the leadership of the Information Office of the State Council and the management of China foreign language publishing and Distribution Bureau. Through 11 versions in 10 languages, the website publishes information 24 hours a day. It is an important window for China to carry out international communication and information exchange.