The U.S. Securities and Exchange Commission filed an enforcement action against Shanghai-based Deloitte Touche Tohmatsu CPA Ltd. for failing to produce documents related to an investigation of its former auditing client Longtop Financial Technologies Limited.
D&T Shanghai hasn’t provided any documents to the SEC, which issued subpoenas to the firm on May 27, the agency said in a statement today, citing a filing in U.S. District Court in Washington. As a result, the SEC has been unable to access “critical” information in its probe of possible fraud at Longtop, the statement said.
Longtop, based in Hong Kong, said in May that D&T Shanghai quit because of errors in the company’s financial records. The SEC also began an investigation. In July, the SEC and Public Company Accounting Oversight Board met with counterparts in China to discuss cross-border oversight.
Today’s action “essentially is a battle between the SEC and Chinese regulators forcing D&T Shanghai to assert Chinese law as an explanation for why it cannot produce records,” Jacob Frenkel, a former SEC lawyer now with Shulman Rogers Gandal Pordy & Ecker PA in Potomac, Maryland, said in an interview. “Auditing firms know that the SEC has the right to subpoena and review and consider audit work papers. This is about bringing to a head the dispute over access to information relating to audits of Chinese companies.”
In order to compete fairly we must have transparency; otherwise we'll all be guilty of doping our domestic businesses to the detriment of the competion.
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Showing posts with label Securities Violations. Show all posts
Showing posts with label Securities Violations. Show all posts
Thursday, September 8, 2011
Friday, August 19, 2011
You’re only sorry we caught you…..
Senator Bernie Sanders, a staunch critic of oil speculators, leaked the information to a major newspaper in a move that has unsettled both regulators and Wall Street alike.
In a June 16 e-mail reviewed by Reuters, a senior policy adviser to Sanders discusses how his office received private data with the names and positions of traders and forwarded it exclusively to a Wall Street Journal reporter.
The e-mail, which also attaches two files with the data, was sent to Public Citizen's Tyson Slocum asking him to review it and speak with the newspaper about his observations.
In a statement from Sanders provided to Reuters, Sanders said he felt the data needed to be publicly aired.
"The CFTC has kept this information hidden from the American public for nearly three years," he said. "This is an outrage. The American people have a right to know exactly who caused gas prices to skyrocket in 2008 and who is causing them to spike today."
The leaked information has sparked concern at the Commodity Futures Trading Commission, which is legally prohibited from releasing confidential information that identifies trader positions and identities.
The leak also raises broader questions as U.S. regulators gear up to collect massive new amounts of private data from market players on everything from swaps and hedge funds to blueprints for how large financial firms can be liquidated. The breach of data could make Wall Street less reluctant to hand over sensitive information if they fear it is not appropriately safeguarded.
Republicans have already raised concerns in recent hearings about the Treasury's new Office of Financial Research created by Dodd-Frank, and whether its collection of data from hedge funds and banks may constitute a regulatory overreach.
Although the CFTC is barred from releasing confidential data, the law does require the CFTC to hand over such information if a Congressional committee acting within its proper authority requests it. Once it is in the hands of Congress, there is nothing to prevent lawmakers from releasing it publicly.
The leaked data contains long and short positions held by oil traders in 2008, the same year that oil prices spiked to $147 a barrel. Critics at the time accused oil speculators of driving up prices, leading lawmakers to later insert a provision into the Dodd-Frank Wall Street overhaul law compelling the CFTC to place stricter limits on how many commodity contracts any one trader can control.
Among the kinds of traders accused of excessive speculation included passive long investors such as pension funds, which often seek exposure to commodities markets indirectly by going through an intermediary swap dealer such as such as Goldman Sachs and Morgan Stanley.
Monday, August 1, 2011
Fortune Cookie reads : “Every excess becomes a vice.”
Investors have alleged widespread accounting irregularities and other problems at dozens of the Chinese companies that reverse-listed in the U.S., causing share prices to nosedive. Since March, some 30 Chinese firms have seen their auditors resign and at least 25 have been delisted from U.S. exchanges.
$18 BILLION GONE
A Reuters examination of a cross-section of 122 Chinese reverse mergers on U.S. markets found that between each stock's peak trading price and July 10, 2011, those companies saw a total of $18 billion of their market capitalization vanish.
Reuters interviewed nearly 100 industry participants and examined financial records of dozens of Chinese companies to paint the most detailed picture yet of the network of dozens of players involved in the reverse-mergers boom.
That industry hinges on a handful of leading "shell brokers" such as Halter who purvey paper companies; investment banks who specialize in financing a firm after a reverse merger; and auditors, usually small shops, who are lightly regulated in the U.S.--and not at all in China and Hong Kong. The controversy has stirred up new tensions between Washington and Beijing, which held talks on the matter in July. The Public Company Accounting Oversight Board, the U.S. auditing watchdog, issued a report in March about potential problems with the audits of Chinese companies formed through reverse mergers. The Securities and Exchange Commission has set up a working group to examine Chinese reverse mergers, and the Federal Bureau of Investigation has opened its own broad investigation, say people familiar with the situation.
The Chinese reverse-merger boom and bust offer insight into a little-understood corner of American business: the widespread use of shell companies, which can offer their owners a way to minimize regulatory scrutiny. The U.S. in recent years has called for much greater transparency in global business transactions. But on American shores, opaque shell companies are rife.
"It appears that some Chinese firms have seen a way to access the strongest public markets in the world, but through the weakest area of enforcement," says Republican Rep. Patrick McHenry, a member of the House Committee on Oversight and Government Reform.
REVERSE GEAR
A reverse merger hinges on a shell company-a firm without meaningful assets or operations, used as a vehicle for transactions-that's already listed on a stock exchange.
A deal typically starts with a so-called shell broker, anyone from a small shop to a larger firm such as Halter's. Brokers acquire shells, often domiciled in a secrecy-friendly state such as Delaware, Utah or Nevada. The broker then sells the U.S. shell to an operating company seeking to trade on a U.S. exchange-a transaction which, unlike an initial public offering, isn't overseen by regulators.
The acquiring firm thus becomes a publicly-traded company, with access to U.S. investors - but without the time, expense and scrutiny of a traditional initial public offering. Companies are incorporated under state rather than federal law, and so the federal overseer of stock flotations, the Securities and Exchange Commission, doesn't as a matter of course review reverse mergers until after the deal is done.
In Chinese deals, the buyer is often a holding company based in Delaware, the British Virgin Islands or other tax haven, which in turn controls the actual operations on mainland China. This structure complicates the ability of U.S. regulators to dig into the accounts of the resulting firms.
In recent years, one in three U.S. reverse mergers involved a Chinese operating company. In 2010, 260 reverse mergers were completed, according to deal tracker PrivateRaise. Of those, 83 deals involved operating companies in mainland China.
There are more than 1,200 dormant public companies in the U.S., PrivateRaise says. They can be purchased for as little as $30,000, then sold by shell brokers for as much as 10 times that amount or more. Brokers say that in 2007 and 2008, the peak of the market, Chinese firms would pay up to $800,000 for a high-quality shell, one with no lingering liabilities. Reverse mergers, to be sure, are a legitimate way to gain access to capital for smaller companies that can't afford a full-fledged initial public offering or don't need to raise large sums. The problem isn't the technique, defenders argue, but rather people who misuse it.
$18 BILLION GONE
A Reuters examination of a cross-section of 122 Chinese reverse mergers on U.S. markets found that between each stock's peak trading price and July 10, 2011, those companies saw a total of $18 billion of their market capitalization vanish.
Reuters interviewed nearly 100 industry participants and examined financial records of dozens of Chinese companies to paint the most detailed picture yet of the network of dozens of players involved in the reverse-mergers boom.
That industry hinges on a handful of leading "shell brokers" such as Halter who purvey paper companies; investment banks who specialize in financing a firm after a reverse merger; and auditors, usually small shops, who are lightly regulated in the U.S.--and not at all in China and Hong Kong. The controversy has stirred up new tensions between Washington and Beijing, which held talks on the matter in July. The Public Company Accounting Oversight Board, the U.S. auditing watchdog, issued a report in March about potential problems with the audits of Chinese companies formed through reverse mergers. The Securities and Exchange Commission has set up a working group to examine Chinese reverse mergers, and the Federal Bureau of Investigation has opened its own broad investigation, say people familiar with the situation.
The Chinese reverse-merger boom and bust offer insight into a little-understood corner of American business: the widespread use of shell companies, which can offer their owners a way to minimize regulatory scrutiny. The U.S. in recent years has called for much greater transparency in global business transactions. But on American shores, opaque shell companies are rife.
"It appears that some Chinese firms have seen a way to access the strongest public markets in the world, but through the weakest area of enforcement," says Republican Rep. Patrick McHenry, a member of the House Committee on Oversight and Government Reform.
REVERSE GEAR
A reverse merger hinges on a shell company-a firm without meaningful assets or operations, used as a vehicle for transactions-that's already listed on a stock exchange.
A deal typically starts with a so-called shell broker, anyone from a small shop to a larger firm such as Halter's. Brokers acquire shells, often domiciled in a secrecy-friendly state such as Delaware, Utah or Nevada. The broker then sells the U.S. shell to an operating company seeking to trade on a U.S. exchange-a transaction which, unlike an initial public offering, isn't overseen by regulators.
The acquiring firm thus becomes a publicly-traded company, with access to U.S. investors - but without the time, expense and scrutiny of a traditional initial public offering. Companies are incorporated under state rather than federal law, and so the federal overseer of stock flotations, the Securities and Exchange Commission, doesn't as a matter of course review reverse mergers until after the deal is done.
In Chinese deals, the buyer is often a holding company based in Delaware, the British Virgin Islands or other tax haven, which in turn controls the actual operations on mainland China. This structure complicates the ability of U.S. regulators to dig into the accounts of the resulting firms.
In recent years, one in three U.S. reverse mergers involved a Chinese operating company. In 2010, 260 reverse mergers were completed, according to deal tracker PrivateRaise. Of those, 83 deals involved operating companies in mainland China.
There are more than 1,200 dormant public companies in the U.S., PrivateRaise says. They can be purchased for as little as $30,000, then sold by shell brokers for as much as 10 times that amount or more. Brokers say that in 2007 and 2008, the peak of the market, Chinese firms would pay up to $800,000 for a high-quality shell, one with no lingering liabilities. Reverse mergers, to be sure, are a legitimate way to gain access to capital for smaller companies that can't afford a full-fledged initial public offering or don't need to raise large sums. The problem isn't the technique, defenders argue, but rather people who misuse it.
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