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Disciplinary findings Choi Kwok Man, CPA (practising) and K.M. Choi & Au Yeung Limited Complaint: Failure or neglect to observe, maintain or otherwise apply section 130 Professional Competence and Due Care of the Code of Ethics for Professional Accountants. The corporate practice audited the financial statements of a listed company in Hong Kong for the years ending 31 December 2007, 2008 and 2009. Choi is one of the practising directors of the corporate practice and Choi signed the relevant audit reports. An investigation of the audits by the Financial Reporting Council revealed that the respondents issued unqualified audit reports on the relevant financial statements notwithstanding that the listed company did not apply IFRS 2 Share-based Payment to account for share options granted to the employees of the listed group. After considering the FRC investigation report and information available, the Institute lodged a complaint against the respondents under section 34(1)(a)(vi) of the Professional Accountants Ordinance. Decision and reasons: Choi will be removed from the register of CPAs for 18 months with effect from 18 November; and the corporate practice will be reprimanded for their failure or neglect to observe, maintain or otherwise apply a professional standard issued by the Institute. In addition, Choi and the corporate practice were ordered to pay the costs of the disciplinary proceedings of HK$162,265.40, which included the FRC investigation costs of HK$81,016.40. When making its decision, the Disciplinary Committee took into consideration the particulars in support of the complaint, the nature of the breaches and the conducts of Choi and the corporate practice throughout the proceedings. Yip Kai Yin, CPA (practising) Complaint: Failure or neglect to observe, maintain or otherwise apply section 100 Introduction and Fundamental Principles, section 110 Integrity and section 130 Professional Competence and Due Care of the Code of Ethics for Professional Accountants. Yip is a practising member of the Institute. The Institute received information from the Professional Insurance Brokers Association about Yip’s failure to diligently discharge his duty to 4

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Crucial consultation begins Proposed framework on audit regulation The Institute announced a three-month consultation last month to solicit members’ views on the draft proposed framework for independent regulation of listedcompany auditors, following extensive discussions with the government and the Financial Reporting Council. (See the cover feature of this issue for more.) Meanwhile, the Sixth Long Range Plan, which lays out the future direction for the profession, was also released and is available on the Institute’s website. The plan is a result of collaborative efforts in the last 18 months from Council and committee members, management and other volunteer members.

Disciplinary findings (continued) report to the association that a company had not fulfilled the minimum requirements for paid-up capital and net asset value for the purpose of the association processing the company’s membership application. After considering the information available, the Institute lodged a complaint against Yip under section 34(1)(a)(vi) of the Professional Accountants Ordinance.

Decision and reasons: Yip was reprimanded and ordered to pay to the Institute a penalty of HK$60,000. In addition, Yip was ordered to pay the costs of the disciplinary proceedings of HK$21,532. When making its decision, the Disciplinary Committee took into consideration the particulars in support of the complaint, the nature of the breaches and the conduct of Yip throughout the proceedings. Yip Tze Wai, Andy, CPA (practising) Complaint: Yip was guilty of dishonourable conduct. Yip is a practising member of the Institute. Yip was convicted of an offence under the Organized and Serious Crimes Ordinance (Cap. 455) in that he had dealt with a property, knowing or having reasonable grounds to believe that property, namely the sum of US$239,033.75, in whole or in part directly or indirectly represented the proceeds of an indictable offence. Yip was sentenced to imprisonment for two years and nine months. The Court of Appeal dismissed Yip’s appeal against his conviction and sentence. After considering the information available, the Institute lodged a complaint against Yip under section 34(1)(a)(x) of the Professional Accountants Ordinance. Decision and reasons: Yip will be removed from the register of CPAs for four years with effect from 13 November. In addition, Yip was ordered to pay costs of the disciplinary proceedings of HK$35,351. When making its decision, the Disciplinary Committee took into consideration the particulars in support of the complaint, the nature of the breaches and the conduct of Yip throughout the proceedings. Details of the disciplinary findings are available at the Institute’s website: www.hkicpa.org.hk.

Obituaries The Institute notes with regret the passing of Gloria Yau Mun-yu and Rocky Shek.

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INTERNATIONAL

JPMorgan Chase said to settle bad home loans cases for US$13 billion

Bank still faces criminal investigation in California

Angeles Times quoted sources as saying. The New York Times reported that the settlement was concluded after a two-hour meeting between JPMorgan Chase chief executive Jamie Dimon and U.S. attorney general Eric Holder. Sources told the New York paper that Dimon insisted on a non-prosecution clause as the basis for any settlement, but that Holder rejected the condition outright, calling it “a non-starter.” The increasing number of lawsuits and regulatory probes led JPMorgan Chase to take a US$7.2 billion charge in its third quarter results, the bank announced on 11 October. This was its first loss under Dimon, who has led the bank since 2006.

AFP AFP

JPMorgan Chase has tentatively agreed to a US$13 billion civil settlement with the United States government over the bank’s mortgage securities business, it was reported last month. The settlement will include US$9 billion in fines JPMorgan Raghuram Chase Rajan and penalties and US$4 ment mortgage agencies when it billion in other payments, CNN quoted an unnamed U.S. Depart- sold them home loans. The total settlement covers ment of Justice official as saying. conduct from 2005 to 2007 and The settlement relates to the includes investigations of the collapse of mortgage-backed mortgage businesses of Washsecurities and related derivaington Mutual and Bear Stearns, tives, which was regarded as a which were both acquired by key cause of the global financial JPMorgan Chase. crisis that began in 2007. While the deal would put The US$4 billion settlement includes payments in connection civil cases to rest, JPMorgan Chase remains the subject of a with allegations by the Federal criminal investigation by federal Housing Finance Agency that JPMorgan Chase misled govern- prosecutors in California, the Los

Twitter stock price surges on trading debut Shares in Twitter, the popular microblogging site, soared 92 percent on their trading debut on the New York Stock Exchange on 7 November, pushing the company’s market value to around US$25 billion. Twitter shares opened at US$45.10, up from the initial public offering price of US$26. In the first few hours, the stock jumped as high as US$50.09, with shares closing at US$44.90. Twitter’s successful IPO comes despite the company never making a profit and posting a net loss of US$64.6 million in the third quarter. Even at its IPO price of US$26, the company was valued at 33 times its revenue in the past year. Sources said investors asked for 30 times the 70 million shares on offer, Reuters reported.

New Bank of Israel chief named amid concern over rising shekel The Bank of Israel’s interim governor, Karnit Flug, has been named permanently to the position, becoming the country’s first woman central bank chief and ending months of instability. The government confirmed on 20 October that Benjamin Netanyahu, Israel’s prime minister, and finance minister Yair Lapid had appointed Flug, who had been acting governor since Stanley Fischer stepped down on 30 June. Her appointment was

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widely welcomed. “This is a good decision,” Rafi Gozan, chief economist at IBI, one of Israel’s largest brokerage firms, told the CNBC business network. “It took too long,” he added. “Netanyahu should have done this earlier.” Flug was formerly an economist with the International Monetary Fund and the InterAmerican Development Bank before being appointed deputy governor in 2011. She takes office as Israel tries to narrow its budget deficit and

deal with an appreciating Israeli currency. “Flug will need to focus on the shekel as its rise has threatened exports,” said Gozan. “That will be job number one.” Last month, Flug cut interest rates by 0.25 of a percentage point, despite opposition from some of her colleagues on the bank’s monetary committee, the Financial Times reported. Flug was recommended by Fischer to succeed him. However, Netanyahu and Lapid first selected former governor

Jacob Frenkel, who withdrew his candidacy after being arrested at Hong Kong International Airport in August for allegedly stealing a bag from a duty-free shop. Several other prospective candidates also turned down the post, the Jerusalem Post noted, including Leo Leiderman, chief economist of Bank Hapoalim, Lawrence Summers, a former United States treasury secretary, and Mario Blejer, a former president of the Central Bank of Argentina.

Spanish GDP grows 0.1 percent after nine quarters of contraction

U.K. posts best economic expansion gains in three years

AFP

AFP

Meanwhile, the United Kingdom registered its best performance since the second quarter of 2010. GDP rose by 0.8 percent in the third quarter, according to official data published last month. The increase followed a secondquarter gain of 0.7 percent. The services sector was largely responsible, the Daily Telegraph noted. However, construction and agriculture also expanded, according to the Office for National Statistics. Deputy Prime Minister Nick Clegg told the BBC that the figures “show that we are firmly on the road to economic recovery,” while the chancellor of the exchequer, George Osborne, was quoted in the Daily Express as saying the data showed the nation was on the “path to prosperity.” AFP

Spanish gross domestic product grew 0.1 percent quarter-onquarter in the period from July to September, the Bank of Spain announced last month, marking the first growth period after nine successive quarters of contraction. “The slight recovery in Employment office in Madrid activity in the third quarter road to recovery. Others urged after the fall a quarter earlier caution. “This market has been is due to... a more favourable improving very fast… but it may contribution from the external sector,” the central bank wrote in be far from a real revival,” José its monthly bulletin announcing Luis Martínez Campuzano, a strategist at Citigroup, told the the preliminary data. Madrid newspaper, El Pais. The bank estimated that At 26 percent unemployment, domestic demand accounted for Spain has the worst jobless rate in negative 0.3 percentage points the European Union after Greece, on a quarterly basis, while net while for people under 25 it is 56 trade – exports minus imports – percent. Persistent joblessness has boosted GDP by 0.4 points. prompted many to emigrate to Some analysts said the data Britain, France and Argentina. suggested that Spain was on the

Myanmar land prices soar as firms move in A combination of property shortages and eager foreign investors have caused commercial real estate values in Myanmar to soar towards levels seen only in established Asian markets such as Singapore, it was reported last month. The emergence of the country, formerly known as Burma, as one of the world’s new investment frontiers, has pushed rates for prime office space towards US$100 per square metre (about HK$72 per square foot) in the capital Yangon (formerly Rangoon). City authorities completed an assessment of property values last month in an attempt to thwart buyers trying to minimize payments of a 37 percent transaction tax, the Myanmar Times reported.

Malaysian PM unveils plan for consumption tax in budget speech Malaysian prime minister Najib Razak unveiled the budget for 2014 last month, focusing on the country’s fiscal deficit and growing debt. The government forecast federal spending of 262.2 billion ringgit (US$83 billion) in 2014, according to the finance ministry, while total expenditure for this year is estimated at 261.3 billion ringgit. The government said it is committed to gradually reducing the fiscal deficit until a balanced budget is achieved by 2020.

Federal debt levels, it added, would be kept below 55 percent of gross domestic product, while the government pledged to conduct audits on projects valued at more than 100 million ringgit. Among the highlights were a reduction in the corporate income tax rate by 1 percentage point to 24 percent, while the income tax rate for smaller companies will be reduced by 1 percentage point to 19 percent from the 2016 tax year. Najib, who is also finance

minister, announced that the government would introduce a goods and services tax from April 2015. The 6 percent tax would be the lowest among Association of Southeast Asian Nations member states, Reuters reported, adding that rice, meat and other food staples, transport and some utilities would be exempt. The single tax will enable the government to address weaknesses in the current taxation system, the New Straits Times noted. The government announced

it would also abolish subsidies on sugar, saving 325 million ringgit and raising the price per kilogram from 1.50 ringgit to 1.84 ringgit. Domestic Trade, Cooperatives and Consumerism Minister Hasan Malek urged consumers not to hoard sugar. Malaysia, a popular retirement destination for Asia-Pacific pensioners, hopes to rein in home prices by raising the minimum price of property that can be purchased by foreigners to 1 million ringgit from 500,000 ringgit.

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INTERNATIONAL

Grant Thornton U.K. to enter Big Four’s auditing territory The British arm of Grant Thornton expects to double its FTSE 250 audit work by 2017 following reforms by regulators, the firm’s chief executive said last month. Scott Barnes told The Independent that the Competition Commission’s demand that listed firms tender for audits every five years will enable the firm to audit at least 15 FTSE 250 clients within three to four years.

Xero doubles forecast for half-yearly earnings Accounting software company Xero has nearly doubled its earnings forecast for the first half of the 2014 financial year. Xero now expects operating revenues to be NZ$30.3 million this year, up from NZ$16.5 million for the same period last year. Chief executive Rod Drury told Radio New Zealand that the company is yet to make a profit.

240 candidates enrol for Singapore’s own QP Singapore’s first homegrown accounting qualification programme drew 240 candidates for its first course, the Singapore Accountancy Commision announced last month. Another 100 students with non-accounting degrees have enrolled in a foundation programme needed before they start the Singapore QP course.

Banned KPMG ex-partner settles over insider trading Scott London, the former KPMG engagement partner in the United States accused of insider trading, has settled administrative proceedings with the U.S. Securities and Exchange Commission. He faces sentencing on criminal charges next month. Compliance Week reported that London recently updated his status on the LinkedIn professional networking website, writing that he’s “looking forward to starting over again.”

Albania to hire Big Four firm to audit state assets Albania’s prime minister, Edi Rama, said last month that an international accounting firm, probably one of the Big Four, would be commissioned to audit the country’s finances, the Tirana newspaper Gazeta Shqiptare reported. 8

November 2013

PwC acquisition of Booz & Co. will extend its consulting reach

Merger plan is subject to partners’ vote next month PricewaterhouseCoopers announced last month that it would acquire Booz & Co. in the largest example of a recent trend by auditing firms to boost their consulting business. The price tag for the purchase was not disclosed but the Financial Times speculated the acquisition to be worth more than the US$1 billion in revenues that Booz & Co., the New York-based corporate advisory and management consultant group, recorded in 2012. The PwC move is believed to be in response to recent acquisitions by rivals Deloitte, KPMG and EY. Acquiring Booz & Co. would boost PwC’s advisory business, which is already its fastest-growing area. PwC has made a number of strategic acquisitions over the past four years, including that of Paragon Consulting Group and the commercial consulting arm of BearingPoint, as well as niche consultants in media, technology and the environment. The Wall Street Journal noted that medium-sized consulting firms such as Booz have struggled to compete with McKinsey & Co., Bain & Co. and other larger rivals since the global financial crisis began in 2007. PwC and Booz announced they had signed a conditional merger agreement subject to approval by Booz’s 300 partners, who would vote next month. According to the Journal, the deal is subject to antitrust regulatory approval in the United States. New auditors would have to be found for Booz clients who have their yearly audit undertaken by PwC, it added. Booz & Co. is a separate company from Booz Allen Hamilton, the listed consulting firm best known for its former employee turned secrets leaker, Edward Snowden. Booz & Co. was split from Booz Allen Hamilton in 2008.

Australian accounting bodies in fight for New Zealand members Australia’s two largest accounting bodies are competing to win members from neighbouring New Zealand. The 73,000-member Institute of Chartered Accountants Australia, a member of the Global Accounting Alliance, voted last month on a proposal to merge with the New Zealand Institute of Chartered Accountants, another GAA member, to create a “trans-Tasman institute” of 90,000 members. Meanwhile, CPA Australia, which has 144,000 members, last month offered free one-year memberships to NZICPA members in a bid to persuade them to join its organization instead. ICAA president Tim Gullifer told the Sydney-based Business Review Weekly that the merger would mean better services for members. “Having a larger organization allows us to have the financial capacity to deliver more education products and services for our diverse members,” he said. A final announcement on the proposed merger is expected this month.

NEWS GREATER CHINA

Britain woos Mainland bankers in bid to expand yuan trade role High-profile visit signals closer economic ties AFP

The British government last month unveiled measures to make it easier for Chinese banks to open offices in the United Kingdom in a bid to attract more yuan-denominated trade. The chancellor of the exchequer, George Osborne, George Osborne said on a visit to Beijing last One of the motives for atmonth that new terms would be tracting Chinese banks is the offered to China’s state-owned banks, enabling them to register potential for developing London as a major hub for yuan trade and as branches with the British boosting City employment, the financial regulator and develop Daily Telegraph reported. their wholesale businesses. “A great nation like China Britain’s policy shift follows should have a global currency,” repeated complaints by large Osborne said in a speech at PeMainland banks to British and Chinese authorities that the U.K. king University. “It is my personal mission that as you develop an inwas putting up regulatory obstacles to their expansion. (Three ternational role for the renminbi, of the four largest Chinese banks you develop that role through the have set up their headquarters in international centre of finance – London.” Luxembourg.)

The chancellor led a five-day trade mission to Beijing last month, accompanied by London mayor Boris Johnson, Bank of England deputy governor Charlie Bean and other officials and business leaders. The delegation’s arrival coincided with an announcement that Beijing Construction Engineering Group Co. would invest in an £800 million joint venture to develop an international business district in Manchester, Britain’s secondlargest city. The U.K. is also relaxing visa rules for Chinese citizens: Business visitors will now be able to apply for a 24-hour priority visa instead of having to wait up to a week, the Financial Times reported.

New banks face tighter capital rules China’s banking regulator plans to more than triple the minimum registered capital requirement for new foreign banks, it was reported last month. Shanghai Securities News said that the China Banking and Regulatory Commission intends to raise the minimum capital requirements for newly registered wholly owned banks and joint ventures to 1 billion yuan from 300 million yuan. The move follows the proposed tightening of rules affecting capital adequacy requirements and foreign investment limits on international and joint-venture banks. The Financial Times reported that the commission also intends to expand the scope of services that foreign banks can offer its Mainland clients to include credit cards and yuan-denominated loans.

Japanese makers lead surge in sales of passenger vehicles Passenger car sales in China rose 21 percent in September to an eight-month high, fuelled by an increase in demand for Japanesemade vehicles. Wholesale deliveries of cars, multipurpose and sport-utility vehicles climbed to 1.59 million units last month, the most since the 1.73 million sold in January, the China Association of Automobile Manufacturers reported. Total sales of vehicles, including buses and trucks, gained 20

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percent to 1.94 million units in September, the association said. Sales of SUVs jumped 65 percent to 283,600 units last month. Honda Motor said it sold 73,990 cars with its Mainland joint-venture partners last month, more than double the 33,930 units sold in September last year. Nissan Motor reported an 83.4 percent year-on-year rise to 117,100 units last month, while Toyota posted a year-on-year rise

of 63.5 percent to 72,100 units. Industry observers told Bloomberg that the rebound was due to the fading influence of the disputed Diaoyu/Senkaku islands that provoked boycotts of Japanese goods last year. However, Olive Xia, an analyst with brokerage firm Core PacificYamaichi, told the South China Morning Post that the dispute was still having some impact on sales of Japanese-branded cars. Soaring demand should drive

sales of vehicles made by German carmaker BMW to an all-time record. Its China sales rose 20.2 percent in the first nine months of this year, the company said. Its sales were despite an announcement that it would recall more than 25,000 defective cars in China in 2014 due to a faulty power brake system. BMW has already recalled almost 220,000 cars this year to fix electric power steering systems and tail-light socket adapters.

GDP growth back on target with 7.8 percent gain in third quarter Analysts attribute expansion to stimulus, monetary policy

AFP

China’s gross domestic product grew 7.8 percent in the third quarter, compared with the same period in 2012 – its fastest pace this year – putting the economy on target to reach its official full-year rate of 7.5 percent. Department store in China “The fundamentals of Analytics, told Time magazine. China’s economy are turning for Bureau data showed that the better,” a National Bureau growth in industrial activof Statistics spokesman, Sheng ity, retail sales and fixed asset Laiyun, told a news conference investment slowed slightly in in Beijing on 17 October. September, fuelling concerns Analysts said the growth was that the rebound might not be mainly due to looser monetary sustained. policy and government invest“The Q3 GDP figure is in line ment in infrastructure. “China’s with market expectations but economy rebounded in the third the uncertainty is whether the quarter because of the governcurrent recovery is sustainable,” ment’s stimulus measures,” Shen Jianguang, chief China Alaistair Chan, an economist economist with Mizuho Securiin the Sydney office of Moody’s

ties in Hong Kong, told Reuters. The GDP expansion rate in 2009 was 14.2 percent, but growth has decelerated in 11 of the past 14 quarters. Premier Li Keqiang has said the government would try to keep growth above 7.5 percent. China’s leaders are due to meet this month to formulate an economic development programme that might include more market openings and financial support to private entrepreneurs. “The Chinese economy faces various fundamental challenges, including industrial overcapacity, financial and fiscal risks, a latent property bubble and a falling potential growth rate,” Jian Chang, an economist at Barclays, told the Financial Times.

Inflation rises as bad weather drives up food prices China’s annual consumer price index inflation rate rose to a seven-month high of 3.1 percent in September amid higher prices for common food items, according to National Bureau of Statistics data released last month. Fresh vegetable prices rose nearly 19 percent, while those of fresh fruit were up 12.5 percent in the wake of poor weather for agricultural producers, the bureau reported. The deadly Typhoon Usagi, which left a trail of devastation through southern China’s

farmlands in September, added significantly to the cost of fresh produce, The Independent, a London newspaper, reported. Although the figures were higher than expected, few analysts expect a further sharp rise in inflation or policy tightening in coming months. “We expect CPI inflation to rise further in Q4 and see rising risks that it may rise above 3.5 percent for some months in 2014,” Zhang Zhiwei, chief China economist at Nomura in Hong Kong, told Reuters. Consumer prices rose 0.8

percent month-on-month, Yu Qiumei, a senior statistician at the bureau, noted, adding that food prices gained 1.5 percent in September from August due to droughts and floods. In annual terms, food prices jumped 6.1 percent, Yu said. Few economists are concerned about the inflation rate. “We think the inflation situation is still under well control and will not be a concern this year,” Louis Kuijs, chief China economist at the Royal Bank of Scotland in Hong Kong, told CNBC.

Guidelines to help cut production China’s State Council, the country’s cabinet, has issued guidelines to tackle the nation’s production overcapacity. The Guidelines to Tackle Serious Production Overcapacity, announced last month, list five prime sectors with major over production: steel, cement, aluminium, glass and shipbuilding, Reuters reported. The guidelines forbid new projects that expand capacity being started and call for reappraisal of projects already under construction. They also urge enterprises to cut capacity by eliminating obsolescent production lines and recommend that they grow through innovation and cost cutting. Companies are encouraged to consider merging to consolidate capacity under the guidelines, Xinhua noted. Meanwhile, home prices rose at their fastest rate in three years in September, raising concern that a property bubble could further fuel inflation. In response, the People’s Bank of China allowed cash to drain from the financial system, prompting an increase in short-term interest rates. Zhu Haibin, chief China economist at JPMorgan Chase in Hong Kong, said tighter conditions were overdue. “The policy in the past few years overall has been very loose with credit growth way higher than nominal GDP,” he told Reuters.

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NEWS GREATER CHINA

Putin hopes bilateral trade can exceed US$100 billion

Russia hopes proposed large scale joint ventures with China such as oil and gas, a development bank and space exploration projects will help boost bilateral trade by 15 percent next year, President Vladimir Putin said last month. The Russian leader, addressing the APEC Summit in Bali, said trade is poised to leap from the current US$87.5 billion to at least US$100 billion.

Beijing agrees to shorten list of trade exemptions

The Chinese government has agreed to negotiate on trade tariffs affecting information technology products, it was reported last month. Beijing had previously said that it wanted more than 100 items exempted from a list of 260 products that the World Trade Organization had said should be tariff-free.

Poverty alleviation funds to be strengthened: report

The State Council, China’s cabinet, vowed last month to strengthen management and governance of poverty-relief funds. The funds have existed as a safety net for the poor and have helped poverty reduction in the country. However, recent audits have found irregularities such as falsified eligibility information and weak supervision, Xinhua reported, quoting the minutes of a State Council meeting.

New loans extended by four biggest banks rise

China’s four largest state-owned banks extended 276 billion yuan of new loans in September, official media reported last month. The sum marks the third-largest monthly amount issued so far this year by the banks, Shanghai Securities News reported.

Casino mogul signs deal to aim movies at Mainland

Australian casino owner James Packer has signed a deal to invest more than A$475 million to produce 75 films with Warner Brothers designed for Chinese audiences, Sydney media reported last month. 12

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Financial secretary backs debate on listing changes Alibaba prompts call for governance discussions John Tsang, Hong Kong’s financial secretary, has backed calls for consultations on changing the stock exchange’s listing rules after a Chinese electronic commerce company abandoned its proposed initial public offering. Alibaba considered listing in New York rather than Hong Kong after the stock exchange refused to allow an ownership structure that would have permitted Jack Ma, the company’s founder, and other top executives to nominate a majority of board directors. Tsang said the Securities and Futures Commission and the exchange should canvass market participants about changing the rules. “It would be a good thing to hear from everyone, what their views are, because this has been a subject of discussion,” Tsang told the Financial Times. Both the New York Stock Exchange and rival Nasdaq said they would approve Alibaba’s proposed structure. However, Jonathan Lu, Alibaba’s chief executive, told the South China Morning Post that the company had postponed its plans to list. Charles Li, the chief executive of Hong Kong Exchanges and Clearing, said he wanted a debate over alternative governance structures such as those the Alibaba executives sought, saying that technology companies constituted a special case. “By the time they consider a public listing, the founders’ shareholding may have been diluted from rounds and rounds of financing,” Li wrote on his blog on 24 October. “Therefore, they have a legitimate fear of being removed from the board at the whim of a short-term activist outside investor.”

Deregistered Chinese company asks U.S. regulator to let it relist A Chinese company has asked regulators in the United States to reinstate its securities registration, which was revoked last year after an accounting fraud scandal. In an appeal hearing before the U.S. Securities and Exchange Commission, a lawyer for Shanghai-based China-Biotics, which manufactures probiotics, urged the panel to reverse a February 2012 decision by an SEC administrative law judge that upheld a 2011 enforcement action. “China-Biotics has retained a new auditor, has filed all of its missing reports, and is now fully up to date in its filings,” Jerome Fortinsky, a partner with the Shearman & Sterling law firm in New York, was quoted as saying by Reuters. However, Paul Gillis, professor of accounting practice at Peking University’s Guanghua School of Management, wrote on his accounting blog that the company should not be allowed to relist and described the company as one of the “poster children for accounting frauds in China” and its behaviour as “audacious.” In 2011, BDO resigned as auditor of China-Biotics after allegations of accounting fraud that included a complaint that the company had directed the audit firm to a fake website in a bid to confirm fictitious bank balances.