Financial Regulatory Forum

By Cavas Pavri, Thomson Reuters Accelus contributing author

NEW YORK, Aug. 26 (Thomson Reuters Accelus) – The considerable negative publicity surrounding Chinese companies listed in the United States has made it increasingly difficult for investors to separate the undervalued from the fraudulent. Essential for success: Taking a close look at the firms’ auditors and corporate governance practices going forward.

In April 2011, the Securities and Exchange Commission (SEC) acknowledged that it had established a task force to address what it deemed to be abuses by Chinese companies accessing the U.S. markets through the use of reverse merger transactions. SEC Commissioner Luis Aguilar referred to the proliferation of these companies as a “disturbing trend that seems to have challenging implications for capital formation and investor protection.” In addition to the SEC, the U.S. national stock exchanges have been taking more aggressive actions against Chinese companies. In 2011, almost two dozen Chinese companies have seen trading in their securities halted or have been delisted because of accounting irregularities.

This article discusses areas that investors should focus on in performing their due diligence on investments in Chinese companies.

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By Patricia Lee

SINGAPORE, Aug. 5 (Thomson Reuters Accelus) - Chinese reverse merger companies recently suspended or delisted from U.S. stock exchanges for various breaches may find it more viable to go private than to re-list in the U.S. or elsewhere,  lawyers said. The protracted investigations by U.S. regulators and the potential costs involved in settling the lawsuits mean that, for some companies, selling their entities would be a better strategy.

When the benefits of listing are outweighed by the time and expense, some companies might choose not to re-gain listing in the U.S. or in other jurisdictions, Barry Genkin, partner at Blank Rome and chair of the firm’s Asia capital market practice told Thomson Reuters.  ”In other situations, from a strategic prospective, it may make sense for the company to be sold,” he added. (more…)