SEC Charges China-Based Longtop Financial Technologies for Noncompliance in Reporting
The Securities and Exchange Commission’s Division of Enforcement has charged China-based Longtop Financial Technologies Limited with failing to file current and accurate financial reports with the SEC.
Longtop allegedly failed to file an annual report for its fiscal year that ended March 31, 2011. Furthermore, Longtop’s independent auditor stated in May 2011 that its prior audit reports on Longtop’s financial statements contained in annual reports for 2008, 2009 and 2010 should no longer be relied upon.
The SEC previously filed a subpoena enforcement action against Deloitte Touche Tohmatsu CPA Ltd. in Shanghai for failing to produce documents related to the SEC’s investigation into possible fraud by Longtop, the audit firm’s longtime client.
Under Section 12(j) of the Securities Act of 1934, the SEC is authorized to bring administrative proceedings to determine whether to revoke or suspend the registration of a security if a public company fails to comply with the federal securities laws.
The SEC’s investigation has been conducted by Helaine Schwartz, Avron Elbaum, Lisa Deitch, and Jonathan Cowen of the SEC’s Division of Enforcement. The SEC’s litigation will be led by Mark Lanpher of the Division’s Trial Unit.
“We are taking this action to protect investors because it appears there is no current and reliable information available to the investing public about Longtop,” said Antonia Chion, Associate Director of the SEC’s Division of Enforcement.
The SEC noted that if the administrative law judge overseeing the proceeding revokes the registration of Longtop’s securities, no broker-dealer may execute any trades in those securities. Revocation also would abolish Longtop as a public shell company so that it could not be sold and used as a vehicle for future fraud.
According to the order instituting the administrative proceeding, Longtop’s American depositary shares were listed and traded on the New York Stock Exchange under the symbol LFT beginning in October 2007 after an initial public offering.
On Aug. 29, 2011, the NYSE delisted LFT, finding that the American depositary shares were no longer suitable for continued listing and trading. Currently, Longtop’s American depositary shares trade in the over-the-counter market under the ticker symbol “LGFTY.”
In this litigated administrative proceeding, Longtop will have an opportunity to refute the SEC Enforcement Division’s allegations.
The administrative law judge will then determine whether the allegations are true and whether the registration of Longtop securities should be suspended for a period not exceeding 12 months or revoked altogether. Longtop is required to file periodic reports with the SEC until a final decision is made in this proceeding.
The investigation is continuing.