In the news: SEC sues stock manipulators, the government fines Sina and Nike considers factory relocation

SEC sues stock manipulators

The US regulators filed a civil lawsuit on Monday against a Toronto consultant and four others for helping two Chinese companies enter US markets and make millions in profit by manipulating the trading of their shares. The SEC alleged that the consultant, S Paul Kelley, and three associates arranged reverse merger transactions that brought China Auto Logistics and Guanwei Recycling into the US and drove up the companies' stock prices to sell shares they owned at inflated levels. No-one from the Chinese companies was charged. Kelley, with two of his associates, settled the SEC lawsuit by agreeing to pay more than US$6.2 million (Rmb38.6 million) and be barred from the securities industry.

Source:
The Wall Street Journal

This case marks the latest of several the SEC has filed against so-called “gatekeepers” – consultants, financers and auditors who helped Chinese companies access US markets. Kelley and his associates reached secret agreements with management at China Auto and Guanwei Recycling in 2008 and 2009 in which they would pay for the costs for helping the companies gain US listings in exchange for 30% to 40% of the resulting stock. They then executed reverse mergers with US shell companies that they controlled, and hired a stock promoter to manipulate trading in various ways such as bidding up their prices and engaging in coordinated trading among themselves.

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Sina fined by government over “indecent content”

The Chinese government has fined internet company Sina Rmb5.1 million (US$815,000) over “unhealthy and indecent content” and intends to revoke certain licences such as its internet-publication licence and licence for online transmission of audiovisual programmes. Sina disclosed in a regulatory filing last week that it had received these notices and penalties and is cooperating with the government. It said that the content in question originated from third parties or was posted by users on its channels and that the fine was imposed by the Beijing Municipal Cultural Market Administrative Law Enforcement Unit.

Source:
The Wall Street Journal

Losing the licences could force Sina to stop offering online reading services or video services altogether, or find business partners with these licences to offer the services through cooperation arrangements. The government is clamping down on online companies in the content and goods/services they provide, so they need to be careful and comply with the increasingly strict rules being enforced upon the internet industry. The government is in a race to keep the rapidly-evolving sector under its control.

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Nike talks of shifting China production over labour woes

Nike CEO Mark Parker said on Thursday that the company was considering shifting its production within China following a major strike at a supplier's factory, where thousands of workers staged one of the country's biggest strikes over conditions at Yue Yuen Industrial Holdings – a US$5.6 billion manufacturer of footwear for Nike, Adidas and others. Most of the workers have returned to work after the company agreed to some of their demands. Nike said it has a diverse factory base in China that made it possible to shift production relatively easily. Parker said: “We want to invest in the partners that are really doing the right thing with the workforce.”

Source:
Reuters

The Yue Yuen workers went on strike in Dongguan city on April 14. Activists have labelled the strike as one of China's biggest labour protests since market reforms began in the late 1970s. The workers were protesting against chronically low company contributions to social insurance and housing provident fund accounts, though the company has claimed up to 80% of the workers have now returned to work. Authorities became involved in the strike, in which one activist was placed in criminal detention for disturbance after he distributed information online about the strike. With increasing labour unrest in China, companies – especially MNCs with possible culture and communication clashes between management and employees – are advised to implement an effective employment contract system with all workers, have an action plan in case of unrest and communicate effectively and respectfully with workers, activist groups and the government.

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