WASHINGTON, June 21 (Reuters) - U.S. securities regulators
are developing policy changes to address the recent rash of
accounting scandals at U.S.-listed companies based in China and
other countries, Securities and Exchange Commission Chairman
Mary Schapiro said on Tuesday.
"We have a menu of ideas we are looking at," Schapiro told
reporters on the sidelines of The Wall Street Journal's CFO
Network event held in Washington, D.C. "It's not quite ready
for prime time yet."
The "menu" of ideas being explored by the SEC would be an
additional step by regulators to address growing concerns about
accounting and auditing of foreign-based companies that list in
the United States.
The SEC has already taken enforcement action, often in the
form of trading suspensions, against companies whose auditors
have resigned over concerns about accounting fraud. Some of
these companies have gained access to the U.S. markets by
merging with shell companies here, even though most of their
operations are overseas.
One of the largest companies to be caught up in the SEC's
probe so far is Longtop Financial Technologies Ltd, whose
auditing firm Deloitte Touche Tohmatsu CPA Ltd quit after
allegedly discovering falsified financial records.
Shareholders have already sued numerous China-based,
U.S.-listed companies for fraud, saying they lost money when
stocks tanked after financial scandals came to light. Some of
the suits have also targeted the companies' auditors.
During a question and answer session at the CFO Network
event, Schapiro told the audience the SEC is trying to strike a
balance between investor protection and ensuring companies have
access to the U.S. capital markets.
"We want... foreign private issuers to list in the United
States," she said. "But we also want to make sure that U.S.
investors have access to the information that they need to make
the right kinds of investing decisions."
Since March, more than two dozen China-based companies have
disclosed auditor resignations or accounting problems. Most of
the companies so far have generally been small in size. Earlier
this month, the SEC issued an investor advisory bulletin
warning about the risks involved with reverse mergers.
Concern about accounting at these companies has also led
some brokerages to prevent investors from borrowing on margin
to buy stocks of China-based companies.
The SEC formed a task force last year dedicated to rooting
out accounting problems, and it has been probing companies and
The SEC is working with Chinese regulators to try to help
the U.S. Public Company Accounting Oversight Board, which
polices auditors, to be able to do inspections abroad.
It is also reviewing a proposal by the Nasdaq exchange that
would tighten listing standards.
Until now, the SEC has remained largely silent on what
policy changes it might take to address the problem.
When asked when her menu of ideas will be ready to be
released publicly, Schapiro said: "very soon."
Meanwhile, the U.S. securities industry is studying ways to
avoid lengthy trading halts of U.S.-listed Chinese securities
that have been suspected of accounting problems, the Securities
Industry and Financial Markets Association (SIFMA) said.
(Reporting by Sarah N. Lynch; Additional reporting by Terry