Northern Long Dragon receives regulatory letter from the Shenzhen Stock Exchange due to revenue recognition across periods and internal control deficiencies; three senior executives are accused of not fulfilling their duties diligently.

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北方长龙新材料技术股份有限公司 (hereinafter referred to as “the company”) and the company’s chairman Chen Yue, general manager Xiang Hua, and the then financial head and board secretary Meng Haifeng received a regulatory letter from the Shenzhen Stock Exchange’s Growth Enterprise Market management department on March 20 (Growth Enterprise Market Regulatory Letter [2026] No. 40). The regulatory letter pointed out that the company has issues with income recognition across periods and internal control deficiencies, and the responsible individuals failed to fulfill their duties and perform their obligations with integrity and diligence.

According to facts previously determined by the Shaanxi Regulatory Bureau of the China Securities Regulatory Commission, Beifang Changlong mainly has two issues. First, there are situations of income recognition across periods; in 2024, the company recognized income from certain clients across periods, leading to inaccuracies in the data disclosed in the company’s 2024 annual report. Second, there are deficiencies in internal control, specifically the company’s “Sales Management System” has not established product acceptance rules based on actual business classifications, the sales and acceptance procedures for installed products have not strictly adhered to relevant internal control requirements, and there has been insufficient review of acceptance documentation related to income recognition, as well as instances where employees have improperly handled client confirmation letters.

The regulatory letter states that the company’s aforementioned actions violate Article 1.4, Article 4.1.1, and Article 5.1.1 of the “Rules for the Listing of Stocks on the Growth Enterprise Market (2025 Revision),” as well as Article 1.4 and Article 5.1 of the “Self-Regulatory Guidelines for Listed Companies No. 2 – Standardized Operation of Growth Enterprise Market Listed Companies (December 2023 Revision).”

At the same time, the company’s chairman Chen Yue, general manager Xiang Hua, and the then financial head and board secretary Meng Haifeng have been found to have failed to fulfill their duties and perform their obligations with integrity and diligence, violating Article 1.4, Article 4.2.2, and Article 5.1.2 of the “Rules for the Listing of Stocks on the Growth Enterprise Market (2025 Revision)” and Article 3.1.1 and Article 3.3.38 of the “Self-Regulatory Guidelines for Listed Companies No. 2 – Standardized Operation of Growth Enterprise Market Listed Companies (December 2023 Revision),” holding primary responsibility for the company’s aforementioned violations.

The Shenzhen Stock Exchange requires the company and relevant responsible individuals to fully address the above issues, learn from the lessons, rectify in a timely manner, and prevent similar issues from occurring again, reminding listed companies that they must earnestly and promptly fulfill their information disclosure obligations according to national laws and regulations and exchange rules, and all members of the board of directors must ensure that the information disclosed is true, accurate, and complete, with no false records, misleading statements, or significant omissions, and bear individual and joint liability for their guarantees.

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Editor: Xiao Lang Quick Report