Early Warning of Delisting Risks During the Investigation Stage: Further Enhancement of Regulatory Effectiveness

Recently, the Shanghai Securities Regulatory Bureau and the Liaoning Securities Regulatory Bureau successively announced the phase investigation status of Zhuoran Co., Ltd. and Cuihua Jewelry in two cases, warning the market about the risk that both companies may face mandatory delisting due to significant legal violations. This is the first time in the capital market that an investigation phase has issued a warning about a company's delisting risk, reflecting a further upgrade in the quality and effectiveness of regulation in the capital market. According to convention, regulatory authorities typically only clarify that a company is suspected of serious legal violations leading to mandatory delisting during the pre-notification phase of administrative penalties. During the investigation period prior to this, regulatory agencies usually do not proactively disclose the phase investigation status unless absolutely necessary. The timeline from the initiation of the investigation to the issuance of the pre-notification administrative penalty notice generally requires several months or even longer for evidence gathering. However, the timing of the delisting warning for the above two individual cases was released while the investigation was still ongoing and before the pre-notification notice had been issued, representing a clear advancement in the timeline. Industry insiders pointed out that the timely public disclosure of phase investigation results by regulatory authorities, especially regarding investigations involving potential financial fraud, can signal delisting risks to the market earlier, enabling investors to adjust their investment strategies in a timely manner, compressing the space for market speculation, avoiding the interference of false information in the market, and prompting market pricing to return to fundamentals.