atans1

Due diligence: a cautionary tale

In China on 29/02/2012 at 6:42 am

The fraud at Puda Coal, a Chinese company traded in the United States, was spelled out in documents that were publicly available months before the company raised $100 million from investors, but it appears no one bothered to look, writes Floyd Norris of The New York Times.

http://www.nytimes.com/2012/02/24/business/sec-charges-reveal-fraud-in-chinese-company.html?_r=2&ref=business&nl=business&emc=dlbka35

More chillingly is that the the Chinese authorities are making it more difficult to inspect publicly-filed documents, often informing the filers who are asking for filings.

So play, play in China at yr own risk. Like having unprotected sex.

China Sky shows how impotent SGX is when it comes to China stocks. Can only reprimand directors. I tot it damned funny that the CEO (and a major shareholder) could juz resign like that,

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  1. Perhaps SGX should give up its role as a securities exchange regulator and pass it on to MAS or some other organization.

    There is a direct conflict of interest because SGX is a public-listed company. It wants more companies to list on its exchange so that it can generate more trading volume and earn more revenue. This probably led to the poor level of scrutiny at these S-chip companies’ corporate governance and financial statements when they initially applied for public listing.

  2. Thanks for an interesting post I’d like to add two points based on my experience (1) it is importnant to explain your vetting process to potential targets otherwise they might get worried if you late in the process introduce a detailed due diligence (2) Conduct “soft” due diligence through out the deal process. Not just after signing an LOI. A good source for finding people to support you in due diligence is http://www.chinaduediligence.com they have the most comprehensive directory of due diligence providers in China.

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