Securities Law Archives - The Law Offices of Jeff Peterson

Chinese companies are delisting off the N.Y.S.E.

Chinese Companies Delisting off the NYSE

January 4, 2022/in News, Securities Law /by Jeff Peterson

According to a December 2021 article from the New York Times, dozens of Chinese companies publicly traded on the N.Y.S.E. may be delisted over the course of the next three years because of ongoing disputes over audit transparency in Chinese and Hong Kong-based accounting firms.

The United States and China have been arguing about the audit issue for roughly more than a decade since the 2011 meeting and agreements signed by President Barack Obama and President Hu Jintao.

At issue are audit standards for publicly traded companies.

The Securities and Exchange Commission currently has the authority to delist The Securities and Exchange Commission currently has the authority to delist companies that do not have approved overseas audits. The Public Company Accounting Oversight Board (the “PCAOB”) has thus far been unable to fully inspect the audit papers and other documents of accounting firms in China and Hong Kong. These pending audits will affect the listings of such entities as Didi Rideshare and more than 190 other companies in a similar situation.

The aforementioned accounting firms have signed audit reports for nearly 200 publicly listed companies on the N.Y.S.E.. Those companies all run the similar risk of being delisted if the transparency requirements of the PCAOB are not met. The potentially non-compliant audit reports account for a combined global market capitalization of $1.9 trillion.

China is increasingly willing to trade on the Hong Kong exchange and leave the American markets indefinitely. At the start of 2021, China Telecom, China Unicom, China is increasingly willing to trade on the Hong Kong exchange and leave the American markets indefinitely. At the start of 2021, China Telecom, China Unicom, and China Mobile were delisted by the N.Y.S.E. to comply with an executive order that barred Americans from investing in companies with ties to the Chinese military. This and the recent delisting of Didi indicates that investors in the US will have to risk Chinese fiscal oversight regulations and less transparency if they want to invest in the companies now listed exclusively on the Hong Kong Stock Exchange.

Words insider trading written on a book.

SEC CHARGES CHINESE NATIONAL CITIZENS WITH INSIDER TRADING, OBTAINS ORDER FREEZING $29 MILLION IN U.S. ACCOUNTS

February 13, 2017/in News, Securities Law /by Jeff Peterson

Emergency Court Order – Securities & Exchange Commission

The Securities and Exchange Commission announced Friday that it obtained an emergency court order freezing brokerage accounts holding more than $29 million in allegedly illegal profits from insider trading that took place prior to the April 2016 acquisition of DreamWorks Animation SKG, Inc. by Comcast Corp.

In its complaint, the SEC alleged that in the weeks leading up to news of the acquisition, Shaohua (Michael) Yin attained more than $56 million of DreamWorks stock in U.S. brokerage accounts of five Chinese nationals, including his parents. The stock was allegedly obtained over a three-week period after a confidential bid had been placed to buy the studio. After the acquisition was announced, DreamWorks stock price rose over 47%.

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$29M In Profit From The DreamWorks Trade

The SEC’s complaint further alleged that the five accounts gained $29 million in profits from the DreamWorks trades, and that the accounts profited from other suspicious trading in another U.S.-based company and three China-based companies ahead of market-moving news.

Yin, a partner at Summitview Capital Management Ltd., a Hong Kong-based private equity firm, allegedly did not trade in DreamWorks stock through his own account but instead through five accounts from addresses in Beijing and Palo Alto and on a computer that also accessed his email accounts.

Michele Wein Layne, Director of the SEC’s Los Angeles Regional Office, stated in the SEC press release that, “Despite the defendant’s alleged attempts to hide his control over these accounts, the SEC’s data analytic investigative tools enabled us to determine who was behind the suspicious trades. Our action today shows that the SEC will not hesitate to freeze the assets of foreign traders when they use our markets to conduct illegal activity.”

SEC Restraining Order Was Successful

The SEC was successful in securing a temporary restraining order freezing the assets in the five brokerage accounts in the U.S. District Court for the Southern District of New York. A hearing on an order to show cause why an injunction and other relief should not be issued has been scheduled for February 17.

The SEC’s complaint charges Michael Yin with securities fraud and names the holders of the five brokerage accounts – Lizhao Su, Zhiqing Yin, Jun Qin, Yan Zhou and Bei Xie – as relief defendants. The SEC is seeking a permanent injunction, return of all allegedly ill-gotten profits, civil money penalties, and other relief.

The SEC’s press release can be viewed at the following link:

https://www.sec.gov/news/pressrelease/2017-44.html

SEC REFILES FRAUD COMPLAINT AGAINST TEXAS AG

October 24, 2016/in News, Securities Law /by Jeff Peterson

The SEC refiled federal fraud charges against Texas Attorney General Ken Paxton, after the agency’s initial civil complaint was dismissed by a judge for lack of sufficient evidentiary allegations.

The amended complaint alleges Paxton knowingly defrauded an investment group he was involved with by violating an agreement that no member would pitch investment in a company if they were receiving any benefit that was not being provided to the other members of the investment group. Specifically, the SEC alleges that Paxton recommended the group invest in startup Servergy Inc. while that company was paying him a commission, a fact that was not disclosed to the group.

The amended complaint additionally alleged that Paxton did not properly disclose his commission on his taxes. Paxton’s attorneys released a statement that they were “disappointed” in the SEC’s decision to refile the case. The judge ordered the initial dismissal because the allegations did not establish any affirmative duty on Paxton’s part to inform potential investors that he stood to profit from any investment.

The case is number 4:16-cv-00246 in the United States District Court for the Eastern District of Texas.

Jeff Petersen is an attorney licensed in California and Illinois representing clients in a wide variety of SEC investigations and SEC enforcement actions. He can be reached in California at 858.792.3666 and in Illinois at 312.450.4584.