CSRC launches new investigation into Sinovel

Sinovel Wind Group Co, a leading wind turbine maker in China, is being investigated by the China Securities Regulatory Commission (CSRC) due to possible violations of the securities law, the company said in a filing with the Shanghai Stock Exchange on Monday.

The news sent Sinovel's shares tumbling by 9.92 percent on the Shanghai bourse on Monday.

This is the second time that Sinovel has been investigated by the CSRC. In May 2013, the CSRC said it was investigating the company for possible violations including false reporting of financial results.

In April 2013, Sinovel admitted that it had falsely claimed to have made sales revenue in 2011 of 10.4 billion yuan ($1.72 billion). when the actual figure was 9.5 billion yuan. It also said its 2011 net profit was 598 million yuan, rather than the 775 million yuan it had initially claimed.

"The new investigation by the CSRC indicates that further violations (by Sinovel) may have occurred after the probe in May," Wu Lijun, a lawyer at Shanghai-based Oriental Cambridge Law Firm, told the Glo-bal Times Monday.

Sinovel's Monday filing noted that the company's original investors' restricted shares were due to become tradable on Monday, following a control period of 36 months after its IPO in January 2011. However, these shares will remain locked during the current probe.

This indicates that Sinovel might have conducted violations even before its IPO, according to Wu.

If any violations occurred before its IPO, then some investors who bought shares just after the IPO will be eligible to seek compensation, Wu said.

Wu noted that due to the previous CSRC investigation in May 2013, individual investors who bought and sold Sinovel's shares between the company's release of its 2011 annual report and its admission of false reporting in 2013 can seek compensation.

Wu said that Sinovel is facing "huge" compensation claims from individual investors, given the slump in its share price since the IPO. From an offering price of 90 yuan in 2011, the company's share price has plunged since then to the current level of 3.54 yuan.

Sinovel reported a net loss of 699 million yuan in the first three quarters of 2013. Li Ling, an analyst at ChinaVenture Investment Consulting, told the Global Times on Monday that it is unlikely Sinovel will report a profit for the full year, as the industry "was sluggish in 2013."