On September 2, Hangzhou Century Co.,Ltd. (formerly known as Sieyuan Electric, stock code 300078) announced it had received an indictment from the Hangzhou Municipal Procuratorate. The company, along with seven defendants including former Chairman Zhang Lizhong, has been charged with securities fraud and illegal disclosure of material information. The indictment identifies Zhang as the principal offender directly responsible for the scheme, while the other six executives are named as accomplices, with four of them additionally facing combined penalties for multiple offenses.

The case encompasses core positions including the chairman, chief financial officer, board secretary, and supervisory board chair, representing an almost complete dismantling of the listed company's senior management team—a rare occurrence in the A-share market. According to the indictment, the company fabricated significant false content in its bond prospectus for a public issuance and issued fraudulent financial reports, causing investor losses under particularly serious circumstances. This case has exposed a persistent reality where some listed companies continue to treat financial embellishment and statement packaging as capital operation tactics.

The case exemplifies the coordinated administrative-criminal enforcement approach in China's capital markets, signaling that corporate violations will no longer conclude with mere administrative penalties or civil compensation. Both the corporate entity and individual executives are being held criminally accountable. Under Articles 160 and 161 of the Criminal Law, controlling shareholders and actual controllers who organize or direct financial fraud, or who serve as directly responsible supervisors, will face criminal liability as natural persons. Notably, the company had previously received administrative punishment, and this direct transition to criminal prosecution implements the "transfer all applicable cases" policy, breaking the old pattern where many companies escaped with just securities regulator fines and investor lawsuits.

For an extended period, few listed companies triggered criminal accountability for illegal information disclosure. Many actual controllers and executives mistakenly believed that financial fraud and disclosure deficiencies were merely regulatory violations, settleable through fines and investor compensation. This case sends a clear message: financial fraud, omission of material information, and misleading statements are no longer just cosmetic reporting techniques—once they cause serious harm to shareholder and investor interests, they cross the criminal threshold.

This will not be the last criminal prosecution of listed company executives in the A-share market. Since the concentrated outbreak of specialized network communication risks, multiple listed company chairmen and chief financial officers have appeared in court, reflecting tightened legal constraints on actual controllers and senior management. Many are still blurring the lines between public companies and private enterprises, treating listed companies as personal cash machines. Various actions to transfer company funds under different pretexts will no longer be simply classified as non-operating fund occupation; serious cases may constitute crimes of duty embezzlement or misappropriation of funds.

Additionally, actual controllers face financing-related criminal risks. Some companies, to secure capital, promise guaranteed principal and fixed returns to unspecified investors—even when packaged as wealth management products or internal employee benefits—which can easily cross the legal boundary into illegal public deposit-taking or even fundraising fraud. For listed company actual controllers and executives, the calculus must shift: a polished financial statement is merely a temporary facade. Once fraud is exposed, individuals bear severe criminal consequences. When facing regulatory investigations, the approach must change from merely responding to regulatory inquiries to immediately engaging criminal defense counsel to address underlying criminal law exposure.

The era of strengthened capital market oversight has arrived. The cost of financial fraud and disclosure violations has escalated from fines to imprisonment. Listed companies must respect the law and uphold disclosure integrity to protect both their corporate and personal safety.