On November 12, ST Tony (Zhejiang Tony Electronic Co., Ltd., 603595.SH) announced that it had officially received the "Administrative Penalty Decision" issued by the Zhejiang Regulatory Bureau of the China Securities Regulatory Commission (CSRC).
The leading alloy wire manufacturer, which has drawn significant market attention, was fined tens of millions along with several executives for multiple violations, including delayed disclosure of a major contract and false financial reporting.
**Severe Delay in Fulfilling a 675 Million Yuan Contract, Disclosure Lagged** On January 9, 2023, Tony Electronic’s subsidiary signed a procurement contract worth 675 million yuan with Guangdong Tianyu Semiconductor Co., Ltd., accounting for 51.84% of the company’s latest audited main business revenue.
The company announced this major positive development the following day. The agreement stipulated that Tony Semiconductor would deliver 135,000 6-inch silicon carbide substrates to Guangdong Tianyu monthly from May to December 2023.
However, during actual execution, monthly deliveries fell short of the plan starting in May 2023. By the end of October 2023, only 6.74% of the contract had been fulfilled, making it clear that the contract could not be completed on schedule.
Despite this significant risk change that could impact investor decisions, ST Tony delayed disclosure until January 6, 2024—over six months late—severely undermining investors’ right to information.
**Financial Fraud Exposed: Over 100 Million Yuan in Inflated Profits, Up to 70% of Total** The penalty decision detailed three primary methods of financial fraud by Tony Electronic, with inflated profits reaching over 70% of reported figures in some cases.
Regulators found that from 2022 to 2023, Tony Semiconductor misclassified defective silicon carbide substrate crystals—which should have been recorded as R&D expenses—as inventory, understating R&D costs by 56.8149 million yuan and inflating profits by the same amount.
More covertly, during the same period, the company failed to record raw material purchases financed by its affiliate, Huzhou Tony Industrial Group Co., Ltd., leading to underreported R&D and operating costs, thereby inflating profits by 27.4554 million yuan.
Additionally, Tony Electronic inadequately provisioned for inventory depreciation, understating asset impairment losses and inflating profits in its 2022 annual report and 2023 interim report. From 2022 to the first half of 2023, the company underreported asset impairment losses by 26.7834 million yuan, artificially boosting profits by the same amount.
**Penalty Imposed: 7 Million Yuan Fine for Company, 3.5 Million for Chairman** Under the Zhejiang CSRC’s decision, Tony Electronic was warned and fined 7 million yuan for its violations.
Executives were also penalized: former Chairman Shen Xinfang received the highest individual fine of 3.5 million yuan; former General Manager Shen Xiaoyu was fined 1.7 million yuan; former CFOs Yang Yun and Zhong Weiqin were each fined 1 million yuan; and former board secretaries Weng Xinyi and Luo Binbin were fined 900,000 yuan and 600,000 yuan, respectively. Total fines for responsible individuals reached 8.7 million yuan.
In response, Tony Electronic stated that while the penalty triggered an "other risk warning," it did not constitute a major violation warranting delisting. The company assured normal business operations, apologized to investors, and pledged to strengthen internal controls and compliance.
