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October 9, 2011

US federal judge halts SEC’s Longtop probe

The Securities and Exchange Commission’s (SEC) attempt to force Deloitte’s Chinese firm to pass over audit documentation on Longtop Financial Technologies has hit a snag in a federal court, according to Reuters.

US federal judge Deborah Robinson questioned whether she could ask a Chinese firm to hand over documents to a US authority. The SEC is investigating alleged accounting irregularities at Longtop, a China-based company that is listed on a US stock exchange.

Judge Robinson asked why the securities regulator is going through US courts to access the information rather than international procedures set up by the Hague Convention.

SEC lawyer Mark Lanpher told the US District Court for the District of Columbia that applying for information through the Hague Convention would slow the process down by many months and “time is of the essence”.

Robinson ordered the SEC to file a brief that outlines precedent for the court to force Deloitte to respond and shows why the SEC doesn’t have to go through the Hague.

In September, the SEC asked a US federal court to force the Chinese affiliate of Deloitte, D&T Shanghai, to disclose documents relating to Longtop after the firm failed to respond to a US District Court of Columbia subpoena that set an 8 July deadline.

Deloitte at the time said that Chinese authorities are preventing it from complying with an SEC investigation.

In the past year, dozens of Chinese companies listed in the US disclosed auditor resignations and accounting irregularities, which has led to the SEC and Justice Department investigation.


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