Understanding China, One Blog at a Time

An American in China

China Selling the USA Toxic Stocks Now-

Posted by w_thames_the_d on January 23, 2011

This article is a shocker, Chinese companies are increasingly represented in US securities fraud. I dont know how this can happen. A country wiht the sparkling reputation of China and her morals and ethics, I am sure these cases are nothing more than outliers and are from the evil legacy of China’s past. On second thought, maybe its just business as usual with these guys and if you dont pay attention to your stock portfolio or lose your 401k to them then you probably deserve it.


“The folks at Stanford Law School and Cornerstone Research have once again issued their twice-annual study on securities lawsuits.

The newest findings show that while the “traditional” securities-fraud suits dropped significantly, plaintiffs firms are finding work with new types of suits, like suits against Chinese companies that have listed on U.S. exchanges and suits arising out of M&A activity. Click here for my story in Thursday’s WSJ; here for a link to the full report.

As a result, the totals were up: Plaintiffs sought a total of 176 federal securities class actions in 2010, compared with 168 in 2009, according to the study.

There are two potential reasons for the increase in lawsuits against Chinese issuers, according to Joseph Grundfest, a professor at Stanford Law School.

“There’s going to be a learning or adjustment process as Chinese companies adapt to different regulatory or disclosure regimes,” he said. Another possibility, Prof. Grundfest said, is that some of these companies may be flouting U.S. rules.

Also contributing to the total rise in filings: a nearly sixfold increase in suits filed shortly after the announcement of corporate mergers. Such suits, typically filed against takeover targets, often allege that the price agreed to by the company is too low. (Click here for a recent story from Dionne Searcey and me on these types of suits.)

The total number of securities filings, while up year over year, are still below the annual average of 195 filings between 1997 and 2009, according to the study.

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