Chinese Reverse Mergers Raise Serious Concerns for SEC
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The Securities and Exchange Commission said Monday it is investigating the "disturbing trend" of Chinese and other companies making backdoor mergers with dormant shell companies, confirming recent reports.
SEC commissioner Luis Aguilar commented at an investors conference Monday that he is concerned about the number of small private companies that elect to merge with public shell companies instead of taking traditions roads to becoming public.
"While the vast majority of these companies may be legitimate businesses, a growing number of them have accounting deficiencies or are outright vessels of fraud," Aguilar said.
According to a report from the Wall Street Journal citing people familiar with the situation, the SEC has established a task force to conduct wide-scale investigation into how Chinese companies are being brought to U.S. stock markets.
Aguilar noted that there appears to be systematic concerns with the quality of the auditing of the firm's financial reporting, while saying that despite being registered in the U.S., there are currently limitations on how regulators can enforce securities laws.
Two troubled companies cited by Aguilar were Fuqi International (OTC: FUQI) and RINO International (OTC: RINO), both which were once highly ranked at IBD and now de-listed due to accounting questions.
SEC commissioner Luis Aguilar commented at an investors conference Monday that he is concerned about the number of small private companies that elect to merge with public shell companies instead of taking traditions roads to becoming public.
"While the vast majority of these companies may be legitimate businesses, a growing number of them have accounting deficiencies or are outright vessels of fraud," Aguilar said.
According to a report from the Wall Street Journal citing people familiar with the situation, the SEC has established a task force to conduct wide-scale investigation into how Chinese companies are being brought to U.S. stock markets.
Aguilar noted that there appears to be systematic concerns with the quality of the auditing of the firm's financial reporting, while saying that despite being registered in the U.S., there are currently limitations on how regulators can enforce securities laws.
Two troubled companies cited by Aguilar were Fuqi International (OTC: FUQI) and RINO International (OTC: RINO), both which were once highly ranked at IBD and now de-listed due to accounting questions.
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