SEC files court action to force handover of Longtop documents

SEC files court action to force handover of Longtop documents

The Securities and Exchange Commission (SEC) has asked a federal court to force the Chinese arm of accounting outfit Deloitte & Touche to hand over documents related to possible fraud by Longtop Financial Technologies.

Having acted as Longtop's auditor since at least 2007, D&T Shanghai quit in May after "discovering numerous improprieties" during an audit for the year ended 31 March.

In a resignation letter it "identified numerous indicia of financial fraud" and said its prior year reports for Longtop could not be relied on by investors.

The SEC began an investigation into the Hong Kong-based financial technology provider and delisted its American depositary shares from the New York Stock Exchange earlier this month.

As part of the investigation, the watchdog issued a subpoena in May, requiring D&T Shanghai to produce documents by 8 July. However, the documents have not been handed over, leaving the SEC "unable to gain access to information that is critical to an investigation that has been authorized for the protection of public investors".

Now a subpoena enforcement action against the accountancy firm has been filed in the US District Court for the District of Columbia in a bid to force the handover.

Robert Khuzami, director, division of enforcement, SEC, says: "Compliance with an SEC subpoena is not an option, it is a legal obligation. The ability of the SEC to conduct swift and thorough investigations requires that subpoena recipients promptly comply with that legal obligation. Subpoena recipients who refuse to comply should expect serious legal consequences."

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