Posts Tagged US Securities and Exchange Commission
China Bean-Counters Should Open Their Books
By John Foley
| Posted Wednesday, June 20, 2012, at 5:36 PM ET
After a rash of accounting slip-ups, the U.S. Securities and Exchange Commission has put the world’s big four audit firms in a bind by asking their Chinese joint ventures for documents they will find it hard to hand over.
Life only gets tougher for global accountancy firms in China. After a rash of accounting slip-ups, the U.S. Securities and Exchange Commission has put the world’s big four audit firms in a bind by asking their Chinese joint ventures for documents they will find it hard to hand over, according to a source cited by Reuters. China hates cross-border meddling, but it may be counter-productive to throw accountants under the bus.
Deloitte’s joint venture in China already faces a suit from the SEC for refusing to hand over documents relating to Longtop, one of China’s more spectacular accounting frauds of last year. The joint venture argued not only that the SEC couldn’t demand certain files, but that if it complied it might face punishment from China for disclosing “state secrets” – though it’s not clear why Longtop would have many of these.
At worst, the SEC could strip the auditors of their ability to sign off accounts for companies listed in the United States. That would affect not just Chinese companies but also multinationals which rely on Chinese joint ventures to vet their local divisions. Those Chinese companies unable to find a U.S.-approved auditor – there are $66 billion worth of Chinese company shares listed on Nasdaq alone, according to Reuters data – may have to delist.
For China, that might seem a small price to pay for defending the country from foreign snooping. Intervention of any kind is unwelcome. It has taken the U.S. accounting regulator years just to get a vague agreement that it can sit in on Chinese audit inspections. Chinese authorities may even consider U.S. delistings as a boost for domestic markets: a Shanghai exchange official has said Chinese companies are welcome to return home.
The trouble is, despite China’s aspirations to create its own giant accounting firms, domestic bookkeepers still lack credibility. Chinese auditors have little practice at dealing with the quirky shareholding structures common to Chinese firms listing overseas. As China’s technology, banking and manufacturing sectors have already learned, the best way to get that experience is not to close down but to open up – at least in the beginning. Different treatment for accountants doesn’t add up.
- Audit firms torn between SEC, Chinese secrecy (theglobeandmail.com)
- Can U.S. and China Avert Accounting Armageddon? (businessinsider.com)
- Can U.S. and China Avert Accounting Armageddon? (chovanec.wordpress.com)
- WARNING: By the end of this year, there is a very real chance that U.S. securities regulators may forcibly delisting every Chinese company currently listed on a U.S. stock exchange (investmentwatchblog.com)
- Getting US education to China – Shaun Rein (chinaherald.net)
- Chinese secretly copy Austrian town | News24 (mbcalyn.com)
- SEC seeks audit papers from China (todayonline.com)
- “Unless the Chinese can get the inflation rate up, expect a revolution.” (brontecapital.blogspot.com)
- Brazil and China Sign Trade Agreements (nytimes.com)
- Chinese aviation firm to form joint venture with France’s Thales (wantchinatimes.com)
MAY 15, 2012
F.B.I. Begins Preliminary Inquiry Into JPMorganBEN PROTESS
The investigation, which is at an early stage, will focus on several possible lines of inquiry, the people briefed on the matter said. Among other things, investigators will examine JPMorgan’s accounting practices and public disclosures about the trades that prompted the loss.
These people cautioned that the inquiry was preliminary and that it was routine for the Justice Department to open a case after a big bank disclosed a huge blunder. The case is being led out of the F.B.I.’s New York office.
No one at JPMorgan has been accused of wrongdoing. A JPMorgan spokeswoman did not immediately respond to a request for comment.
News of an F.B.I. investigation comes at an awkward time for JPMorgan. On Tuesday, the bank’s top executives gathered in Tampa, Fla., for the annual shareholder meeting, where the trading loss took center stage.
The revelation also follows a similar acknowledgement last week that civil regulators at the Securities and Exchange Commission had opened an inquiry into JPMorgan’s disclosures and accounting practices. Another potential avenue for the S.E.C. to explore is whether the bank’s risk controls broke down. The commission has a lower bar to bring a case than federal prosecutors.
Both inquires are likely to examine JPMorgan’s regulatory filings that mention the internal unit that placed the trades, as well as recent statements from the firm’s top executives.
As media reports surfaced about the chief investment office in early April, Jamie Dimon, the bank’s chief executive, publicly played down the concerns, calling them a “complete tempest in a teapot.”
After Mr. Dimon and other senior executive learned more, he sounded a more contrite tone. On Thursday, when disclosing the loss in a conference call with analysts, Mr. Dimon acknowledged that the bank had made “egregious mistakes.
Investigators are also examining an accounting measure known as value-at-risk. JPMorgan disclosed earlier this year that it changed the calculation for the metric, which may have masked some of the risks surrounding this trade.
The Financial Times reported earlier that the F.B.I. had opened an inquiry into JPMorgan.
- F.B.I. Begins Preliminary Inquiry Into JPMorgan – NYTimes.com (mbcalyn.com)
- DealBook: F.B.I. Begins Preliminary Inquiry Into JPMorgan (dealbook.nytimes.com)
- F.B.I. Inquiry Adds to JPMorgan’s Woes (dealbook.nytimes.com)
- Red Flags Said to Go Unheeded by Bosses at JPMorgan – NYTimes.com (mbcalyn.com)
- Subdued Dimon is confronted over $2B trading loss (seattlepi.com)
- FBI Investigates $2bn JPMorgan Trading Loss (news.sky.com)
- JPMorgan under FBI investigation (todayonline.com)
- Subdued Dimon is confronted over $2B trading loss (news.yahoo.com)
- JPM CEO confronted over $2B trading loss (abcactionnews.com)
- Subdued Dimon is confronted over $2B trading loss (timesleader.com)