Evergrande Unit Says It’s Being Probed by China Watchdog

(Bloomberg) -- The mainland China unit of giant developer China Evergrande Group said the country’s securities regulator has built a case against it relating to suspected information disclosure violations.

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Hengda Real Estate Group said late Wednesday that it received a notification earlier the same day from the China Securities Regulatory Commission. The struggling real estate developer unveiled the news in a Shanghai Stock Exchange filing.

CSRC probes into alleged information disclosure irregularities aren’t rare. Among the 73 domestically listed Chinese companies under investigation as of July 18, more than 70% were suspected of information disclosure violations, local media reported last month.

Targets have also included state-owned giants. China Shipbuilding Industry Co. and Beijing Capital Development Co. said last month they were subject to CSRC investigation over suspicions they violated information-disclosure rules.

A probe doesn’t necessarily lead to penalties, according to law firm King & Wood Mallesons. But if that’s the case, administrative punishiments may include rectification, warning or fines.

CSRC has conducted inspections on listed companies for potential information disclosure related irregularities, and it’s reasonable as developers struggle to “even provide up-to-date financials these days,” said Zerlina Zeng, a senior credit analyst at Creditsights Singapore LLC.

Hengda will actively cooperate with the CSRC in its investigation and fulfill its disclosure obligations, the company added in the statement Wednesday.

(Updates with analyst comment in sixth paragraph)

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