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Ruixing Coffee’s financial fraud has made US securities regulators ubiquitous. On April 22, the chairman of the United States Securities and Exchange Commission (SEC), Jay Clayton (Jay
Clayton stated that investors should not invest money in the shares of Chinese companies listed in the United States.Jay Clayton
Clayton on Morning Business with Fox Business Network (Morning with Maria)
Maria) stated: “We have struggled with the Public Company Oversight Committee (PCAOB) to obtain audit working documents for a long time, and the committee still does not have access. This disappoints us.”
Clayton also defended the previous comments, claiming that “from a financial reporting perspective, our business in China is not as supervised as in other parts of the world.”
PCAOB was established under the Sarbanes-Oxley Act and is regulated by the SEC. PCAOB’s responsibility is to oversee the accounting firms that sign the books of America’s public companies.
Previously, some Chinese stocks listed in the United States were accused of fraud.
On the afternoon of April 2, the Ruixing (Nasdaq: LK) coffee chain revealed to the company’s internal special committee that the counterfeit transaction reached 2.2 billion yuan.
On the afternoon of April 7, the American short agency Wolfpack Research released a 37-page report to sideline iQIYI, alleging that iQIYI had engaged in fraudulent behavior before it was made public in 2018, and that the fraud continued after the list. The short selling agency said iQiyi is expected to increase its 2019 revenue by 8 billion to 13 billion yuan, representing 27% -44% of its revenue, and the company has increased its number of users. by about 42% -60%. .
Subsequently, Muddy Water also claimed to help Wolfpack Research research iQiyi for up to a year and has shortened the stock.
In this regard, iQiyi replied that the external organization issued a report questioning iQiyi. The data and conclusions cited were very false and inconsistent with the actual situation. As a registered responsible company, we disclose all financial and operational aspects. The data is true and complies with SEC requirements. We firmly deny all false allegations and reserve the right to take legal action.
The same day, Good Future issued an announcement saying that certain “employee misconduct” was discovered during the routine internal audit process. Affected by this, Good Future’s share price fell 28% after the market. Good Future stated in the announcement that the local police arrested this employee. Going forward, the company suspects that the employees in question collaborated with third-party vendors, counterfeit contracts and other documents, and erroneously exaggerated “Light Class” sales data, which represents 3% to 4% of the company’s total revenue. company in fiscal year 2020.
At the time of Clayton’s remarks, aggressive US lawmakers and some former officials are trying to persuade the Trump administration to stop the federal employee pension plan from investing in Chinese corporate stocks. These regulations will also allow US investors to file class action lawsuits against companies that make false statements in financial reports, giving investors more protection against fraud at related companies.
The report issued by the United States Securities and Exchange Commission yesterday warned investors about the risks of investing in emerging markets on a larger scale.
“Now is the time for institutional investors to experiment, rebalance and evaluate their portfolios.” Clayton said on the show: “We remind people that when they see information disclosed in an emerging market, it may appear to come from the National Issuers Report, but it is not the same type of investment.”
Chris Iacovella, executive director of the American Securities Association, which represents small investors, said Clayton had raised the alarm again. Supposedly, until now, Yakovila has been studying this topic for at least a year.
The aforementioned report from the United States Securities and Exchange Commission also stated that Chinese companies listed in the United States should “prominently increase risks in plain language and specifically discuss them.” The report states that the US Securities and Exchange Commission. USA And other relevant departments often have great difficulty filing and enforcing lawsuits against non-US citizens. The company makes false disclosures about the nature and quality of financial information, including financial reports and audits.
However, what Clayton and the US Securities and Exchange Commission do. USA They overlooked is that it also deserves market attention that there are currently more than 200 Chinese stocks listed in the United States, including many high-quality companies. In 2000, Sina, Netease, and Sohu representatives on national portals went to the United States for a successful listing, and then the Internet giants represented by BATJ (Baidu, Alibaba, Tencent, JD.com) were also listed successfully. abroad, and Alibaba obtained more than 500 billion dollars in market value. For the Big Mac, there are more than a dozen companies with a market value of more than $ 10 billion, and the market value is in the range of $ 1 billion to $ 10 billion. At the close of the US stock on April 22, Pinduoduo continued to reach new highs, with a market value of over 60 billion US dollars; Bili Bili rose more than 5% and its market value exceeded 10 billion US dollars. Its intraday share price reached $ 30.50, also reaching a record high.
