Header graphic for print
China Law Blog China Law for Business

SEC v. Deloitte. It’s Important.

Posted in Recommended Reading

Professor Donald Clarke of the Chinese Law Prof Blog just did a strictly factual post on the SEC v. Deloitte case.  In that post, Professor Clarke notes how the US Securities and Exchange Commission (SEC) is seeking to obtain the workpapers of the auditors of Chinese companies publicly listed on US stock exchanges and of how last month the SEC started proceedings against the Chinese affliates of “five big accounting firms.”  For a good background on all this, check out the New York Times here.

Professor Clarke then discusses how in related proceedings, the SEC has “subpoenaed documents from Deloitte Touche Tohmatsu CPA, Ltd., the Chinese auditors of Longtop Financial Technologies, a Chinese company whose financial statements were apparently less than totally accurate.

Deloitte is fighting that subpoena by asserting that it is prohibited by Chinese law from turning over the documents sought and that if it does so, it will face punishment in China.  Professor Clarke then provides the following “links to relevant court filings that look at the Chinese law issues here”:

In a listserv email regarding his blog post, Professor Clarke notes that because he is an expert witness in the case, he “won’t be commenting further on the issues my declaration deals with – it speaks for itself – and the same may be true for Jim [Feinerman, one of the other experts], so please don’t think me (or him) rude for not responding to any comments here.

For similar reasons, I too am not able to comment, beyond to say that the issues in this case could prove hugely important and I recommend that you read the information Professor Clarke has provided.

  • Phil H

    Round one to Deloitte, I guess. Prof Clarke agrees – Deloitte probably wasn’t obliged to go to the CSRC, but now that they have, there’s no way they will be able to turn over the documents.

    I know you can’t comment on the case, but I wonder if you have any ideas about how the implications of this could pan out in future. If the SEC is unable to investigate Chinese audits and auditors, could it stop Chinese companies listing in the USA? Has that ever happened before?

  • Fred Rocafort

    An interesting Sinica podcast on this, and on related issues: http://www.popupchinese.com/lessons/sinica/china-versus-the-sec