Corporate & Securities Law

Following a recent, wide-spread probe by the SEC?s enforcement and corporate finance divisions, the attorneys at Eccleston Law are investigating various Chinese companies that are publicly traded on U.S stock exchanges.  Our attorneys are actively seeking to speak with investors have suffered losses investing in a Chinese company or with whistleblowers who may have original information about an ongoing fraud related to a publicly traded Chinese company.

In recent years, hundreds of Chinese companies seeking access to the U.S. capital markets have registered as publicly trading companies on such exchanges as the NASDAQ and OTC-BB through a process called a ?reverse merger?.

In a reverse merger, a privately held company acquires an existing publicly traded company so that it can freely sell shares without undertaking an initial public offering.  In the case of the Chinese companies, they typically acquire small publicly traded companies publicly traded companies with a relatively law market capitalization or a ?shell? company.  A publicly traded shell company is on that has no significant operations or assets, other than the fact that it is still publicly traded on an exchange.   The reverse merger process saves companies the time and expense involved in conducting an initial public offering, or IPO.  However, this may ultimately be at the expense of US investors.

Publicly traded Chinese companies have come under scrutiny by U.S. securities regulators for their lack of transparency, lax corporate governance standards, and questionable accounting practices, which makes these companies ripe for self-dealing and fraud. 

In 2010, the Public Company Accounting Oversight Board observed that from 2007 through 2010, of the 603 reported reverse merger transactions, 159 (or 26%) of all the reverse mergers during that time period were Chinese companies.  Furthermore, the number of Chinese reverse mergers was almost three times the number of IPOs conducted in the U.S. by Chinese companies. 

Recent examples of publicly traded Chinese companies that have harmed investors include RINO International Corporation, which was trading on the NASDAQ at over $30 per share in late 2010.  Following disclosures in November and December 2010 about accounting flaws and an ongoing SEC investigation, RINO?s stock price dropped 80% and the company was subsequently delisted from the NASDAQ.

Investors in who have suffered losses investing in a publicly traded Chinese company may be able to recover their losses through securities litigation or arbitration.  In addition, under the new SEC whistleblower program, those who provide the SEC with original information about a fraud related to a publicly traded Chinese company that leads to a successful enforcement action may be entitled to an award of 10-30% of the fines and penalties levied by the SEC.

Eccleston Law represents individual and institutional investors nationwide to recover their investment losses caused by securities fraud, unsuitable investment recommendations, breach of fiduciary duty, negligence or other misconduct. We have extensive experience representing investors in arbitration and litigation disputes with securities broker-dealers and investment advisory firms, and have recovered tens of millions of dollars for investors.

If you are an investor that has suffered losses investing with a publicly traded Chinese company, or if you have information about a fraud relating to a publicly traded Chinese company, please contact Jim Eccleston at the Eccleston Law Offices at 312-332-0000.