China has been on the radar of U.S. businesses, investors and the SEC for some time now. And we aren’t just talking about it as a cause of the recent stock market tumble. China is the leading country for allegations of violations of the Foreign Corrupt Practices Act, and the SEC has been seeking information about Chinese companies to investigate potential accounting fraud. In light of these concerns and less advantage to being listed on a U.S. exchange, numerous Chinese companies have been delisting or entering going private transactions.
The agreement to settle an SEC investigation into Focus Media and its CEO over inaccurate disclosures to investors for $55.6 million isn’t surprising in that light, but it probably will open some eyes in China. Focus Media is a large Chinese advertising companies with displays in public locations such as elevators and outdoors. It was taken private in 2013 in a leveraged buyout.
In connection with the settlement, a SEC official in the New York office indicated that the SEC wasn’t going to let the geographic location of companies prevent them from ensuring public companies make accurate statements to investors. This is obviously aimed at sending a message to companies located outside of the United States that they can’t take advantage of the U.S. financial markets with impunity.
For whistleblower rewards, the SEC does not distinguish between the geographic location or citizenship of the source of the tip. Chinese whistleblowers can earn an award under the Dodd-Frank program the same as United States citizens.
Photo Credit. I have no idea if that is a Focus Media billboard or not, but I thought it was appropriate. Of course, I haven’t translated it.