Regulatory investigations are widely regarded as significant negative events in the market. The latest additions to the list, Bayi Iron & Steel (600581) and *ST Changyao, both saw their shares hit the daily limit-down on November 10.

Statistics show that 60 A-share companies have been investigated by the China Securities Regulatory Commission (CSRC) this year, with 90% of the cases involving alleged violations of information disclosure rules. Among these, half are under risk warnings (ST/*ST stocks), and nearly 70% reported net losses in the first three quarters, reflecting operational challenges.

So far, 15 of these companies have received penalties, while 10 have been issued preliminary penalty notices.

**90% Cases Linked to Disclosure Violations** On November 7, Bayi Iron & Steel and *ST Changyao disclosed receiving investigation notices from the CSRC. Bayi Iron & Steel was accused of information disclosure violations, while *ST Changyao allegedly falsified financial data in periodic reports.

The news triggered limit-down drops for both stocks on November 10. Bayi Iron & Steel closed at CNY 4.01 per share (market cap: CNY 6.15 billion), while *ST Changyao ended at CNY 2.76 (market cap: CNY 967 million).

Legal experts warn that such investigations can severely damage a company’s reputation and lead to penalties of up to CNY 10 million. In severe cases, criminal liability or investor class-action lawsuits may follow, potentially resulting in billions in compensation claims.

Of the 60 investigated companies, 54 (90%) were cited for disclosure violations. Five, including *ST Yuancheng, faced allegations of financial fraud, while *ST Jintai failed to disclose its 2024 annual report on time.

Notably, *ST Yuancheng announced on November 10 that its shares would be suspended from trading starting November 11, as its market cap had remained below CNY 500 million for 20 consecutive trading days, triggering delisting rules.

**Weak Earnings for Nearly 70%** Among the 60 companies, 30 (50%) carry risk warnings (17 ST and 13 *ST stocks). Financially, 41 (68.33%) reported net losses for the first three quarters of 2025.

Bayi Iron & Steel posted the largest loss at CNY 572 million. Eighteen others, including Luhua Technology, *ST Mubang, and ST Yundong, also reported losses exceeding CNY 100 million.

Of the 41 loss-making firms, 23 saw earnings deteriorate year-over-year, with Huilun Crystal (a quartz components manufacturer) recording the steepest decline. Its Q1–Q3 net profit plummeted 4,566.64% to a loss of CNY 76.12 million.

Eight other stocks, including *ST Wanfang, Huangshi Group, and Dahua Intelligent, reported profit declines exceeding 100%. Even among the 19 profitable companies, nine, such as *ST Jintai and ST Huizhou, saw earnings shrink.

**25 Companies Penalized or Notified** Fifteen companies have already received penalties, while ten were issued preliminary notices.

Knight Dairy received its penalty the fastest—just two weeks after its July 4 investigation announcement. The company was fined CNY 2 million for failing to disclose significant futures trading losses.

ST Yundong faced the heaviest penalty so far: CNY 6 million for falsifying annual reports (2021–2022) through improper revenue recognition, inaccurate expense accounting, and failure to provision for inventory and receivables. Its chairman and other executives were also fined CNY 600,000–2 million.