SOURCE: Marks Paneth & Shron LLP

Marks Paneth & Shron LLP

May 17, 2012 09:30 ET

U.S. Stock Exchanges Should Take Steps to End Reverse Merger Fraud by Many Chinese Companies, Says Marks Paneth & Shron

NEW YORK, NY--(Marketwire - May 17, 2012) - Steven L. Henning, Ph.D., CPA, Partner-in-Charge of the Litigation and Corporate Financial Advisory Services Group at Marks Paneth & Shron LLP and a member of the Listing Qualifications Panel at NASDAQ, has published an article examining the increase in reverse merger fraud on U.S. exchanges on the part of Chinese companies in Financial Fraud Law Report.

Reverse mergers are increasingly being used by many Chinese companies to publish false or misleading financial statements, which can result in the loss of billions of dollars in market value. In short, a Chinese company looking to trade in the U.S. and gain access to its capital markets may merge with a publicly traded U.S. shell company. By pursuing a reverse merger, the Chinese company is able to avoid the regulatory process required with an IPO (as the shell company has already undergone this process) and is able to gain access to U.S. capital markets within mere weeks of completing the reverse merger process.

In the article, Dr. Henning explains:

  • Why U.S. stock exchanges need to tighten the requirements for companies seeking to gain entry into U.S. capital markets through reverse mergers (exchanges are not engaged in the level of due diligence that they otherwise would or should be)
  • The red flags investors should keep an eye out for prior to investing in a company that has gone through a reverse merger
  • The steps the U.S. Securities and Exchange Commission (SEC) has taken against the fraudulent listings of Chinese companies on U.S. exchanges

The full text of Dr. Henning's article, "Exchanges Need to Take Initiative to End New Scam: Fraudulent Listings of Chinese Companies on U.S. Exchanges," can be found in the Marks Paneth & Shron Library.

To speak with Dr. Henning about reverse merger fraud involving Chinese companies on U.S. stock exchanges, please contact Katarina Wenk-Bodenmiller of Sommerfield Communications, Inc. at 212-255-8386 or katarina@sommerfield.com.

About Marks Paneth & Shron LLP
Marks Paneth & Shron LLP is an accounting firm with nearly 475 people, of whom approximately 60 are partners and principals. The firm provides businesses with a full range of auditing, accounting, tax, consulting, bankruptcy and restructuring services as well as litigation and corporate financial advisory services to domestic and international clients. The firm also specializes in providing tax advisory and consulting for high-net-worth individuals and their families, as well as a wide range of services for international, real estate, media, entertainment, nonprofit, professional and financial services and energy clients. The firm has a strong track record supporting emerging growth companies, entrepreneurs, business owners and investors as they navigate the business life cycle.

The firm's subsidiary, Tailored Technologies, LLC, provides information technology consulting services. In addition, its membership in Morison International, a leading international association for independent business advisers, financial consulting and accounting firms, facilitates service delivery to clients throughout the United States and around the world. Marks Paneth & Shron LLP, whose origins date back to 1907, is the 32nd largest accounting firm in the nation and the 13th largest in the New York area. In addition, readers of the New York Law Journal rank MP&S as one of the area's top forensic accounting firms.

Its headquarters are in Manhattan. Additional offices are in Westchester, Long Island and the Cayman Islands. For more information, please visit www.markspaneth.com.

About Steven Henning
Steven L. Henning, Ph.D., CPA, is the Partner-in-Charge of the Litigation and Corporate Financial Advisory Services Group at Marks Paneth & Shron LLP. He has more than 20 years of experience in public accounting, securities litigation, consulting related to US Generally Accepted Accounting Principles (US GAAP), International Financial Reporting Standards (IFRS) and International Public Sector Accounting Standards (IPSAS) as well as teaching at the university level. He is a member of the Listing Qualifications Panel of the National Association of Securities Dealers Automated Quotation System (NASDAQ) and a past member of the SEC Regulations Committee.

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