Thursday, December 6, 2012

Chinese "Secrecy" Laws

Regulators on Monday charged the Chinese arms of five top accounting firms with securities violations over their refusal to produce certain audit papers for U.S.-listed Chinese companies.

The Securities and Exchange Commission began proceedings against the Chinese affiliates of Deloitte, KPMG, PricewaterhouseCoopers, BDO and Ernst & Young. It was the SEC's widest enforcement effort yet to procure documents in connection with probes of possible accounting fraud of U.S.-listed Chinese companies, and raised questions about whether talks have stalled between the U.S. and Chinese governments to resolve the issue.

The SEC said it has been seeking documents related to investigations of possible wrongdoing at nine China-based companies. Chinese secrecy laws have stymied efforts to obtain audit documents that investigators need to determine whether there were accounting irregularities.

I don't understand why there is an issue. If Chinese companies want to be listed on US stock exchanges and attract US investors, then they need to follow US laws on disclosure. If they can't or won't, then they should go find another exchange to list their stock. With China's pervasive corruption, there's no way I would invest in any Chinese company unless they submit to an US audit. Even then, a friend working in Deloitte China has told me about fake invoices, fake purchase orders, fake contracts... even fake bank statements with official red stamps.

The whole Chinese secrecy law excuse is crap too. Laws are not enforced in China... it's just a tool for the CCP to do whatever they want. They can easily release financial documents for audit. The only reason the documents are "secret" is because they're hiding outright fraud or documents corruption by government officials.

I say delist all these companies, especially those that got listed through the "reverse merger" backdoor.

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