SEC Settles Dispute with Chinese Accounting Firms

SEC Settles Dispute with Chinese Accounting Firms

Blog Keeping Current: Disclosure and Governance Developments

The SEC and the Chinese accounting firms associated with the Big Four accounting firm networks have resolved their long-running litigation over the firms' failure to produce documents in connection with SEC investigations. The firms declined to produce the documents on the ground that production would violate applicable laws of the People's Republic of China. The SEC initiated an administrative proceeding against the firms in 2012. In January 2014, an SEC administrative law judge issued an initial decision finding that the firms' failure to produce the documents violated the Sarbanes-Oxley Act. The ALJ barred the Chinese Big Four firms from "appearing and practicing" before the SEC for six months. (See this previous post.) The firms appealed to the SEC.

On February 6, the SEC and the four firms entered into an agreed order with respect to the dispute. Under the agreement, each firm was censured and agreed to pay $500,000. The order stays the administrative proceeding  for four years, provided that the firms perform specific steps regarding production of documents. Importantly, the six-month bar imposed by the ALJ will not take effect so long as the firms comply with the requirements of the order.

The ALJ's six-month bar had raised questions whether it would disqualify the Chinese firms from performing audit services relating to the Chinese operations of SEC-registered multi-national companies. This resolution substantially reduces that concern.


More from this series


Unless you are an existing client, before communicating with WilmerHale by e-mail (or otherwise), please read the Disclaimer referenced by this link.(The Disclaimer is also accessible from the opening of this website). As noted therein, until you have received from us a written statement that we represent you in a particular manner (an "engagement letter") you should not send to us any confidential information about any such matter. After we have undertaken representation of you concerning a matter, you will be our client, and we may thereafter exchange confidential information freely.

Thank you for your interest in WilmerHale.