The U.S. Securities and Exchange Commission on May 10 charged the Chinese division of Deloitte LLP with failing to respond to a subpoena to turn over work papers on behalf of a Chinese client listed on a U.S. stock exchange. The enforcement action — the second against Deloitte during the past two years — sent ripples throughout the accounting world. In a formal statement, Deloitte said its Chinese affiliate is “caught in the middle of conflicting laws of two different governments,” since Chinese law prohibits the firm from providing the documents to U.S. regulators without state approval.
Seth Aronson, a partner at Los Angeles-based O’Melveny & Myers, talked to The National Law Journal from Hong Kong about the implications of the SEC’s action against Deloitte and the rising number of securities suits against China-based companies listed on U.S. stock exchanges. Aronson, who defends such companies in shareholder litigation, also discussed the first ruling in such a case denying class certification — a victory he obtained on behalf of his client, China Agritech Inc., an organic fertilizer company.
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