On the afternoon of June 28, SHIMAO GROUP (00813.HK) announced that the China Securities Regulatory Commission (CSRC) has issued an advance notice of administrative penalties to its wholly-owned subsidiary, Shanghai Shimao Co., Ltd., and related parties including its director, Mr. Xu Shitan. Mr. Xu Shitan is the Chairman, President, and Executive Director of SHIMAO GROUP. Public records show Mr. Xu is 49 years old, the son of the group's founder Xu Rongmao, who joined the company in 1998 starting from grassroots sales and officially assumed the role of President in 2019.

The preliminary notice indicates that the CSRC has completed its investigation into Shanghai Shimao, determining that the company violated information disclosure laws and regulations. This includes, as previously mentioned in several of the company's announcements, failures in timely disclosure and omissions concerning debt, related-party transactions, debt defaults, related-party guarantees, as well as litigation and arbitration matters in its financial disclosures for the period from 2020 to 2022.

The CSRC stated its intention to impose penalties on the relevant parties, which include a warning for Mr. Xu Shitan, a fine of RMB 4.9 million, and a six-year ban from the securities market. Under this measure, effective from the date the CSRC announces its decision, Mr. Xu Shitan would be prohibited from engaging in securities business or securities services at his current institution or any other institution, and would be barred from serving as a director, supervisor, or senior manager of the current securities issuer or any other securities issuer.

SHIMAO GROUP stated that a final decision by the CSRC regarding the proposed penalties is still pending, and the relevant parties have the right to make statements, defend themselves, and request a hearing regarding the proposed penalties. The company has been notified by Mr. Xu Shitan that he is currently evaluating the situation.

The company noted that Shanghai Shimao has made significant progress in rectification efforts and will continue to follow up on the progress of remaining rectification matters, actively promoting and implementing corrective actions. Based on available information, the board of directors of SHIMAO GROUP (excluding Mr. Xu Shitan) believes the preliminary notice will not have a material adverse impact on the group's business and operations. The company will continue to monitor and assess developments and outcomes related to the notice and will inform the market of any significant updates.

At the latest update, shares of SHIMAO GROUP were trading at HK$0.074, up 4.23%, with a total market capitalization of HK$726 million.