Service On Counsel: Does SEC Have New Methods For Reaching PRC Companies?

A Washington, D.C., federal judge may have given the Securities and Exchange Commission a new tool to extend its reach to companies based in the People's Republic of China. Magistrate Judge Deborah Robinson recently ordered Shanghai-based auditors Deloitte Touche Tohmatsu CPA Ltd. (DTT) to appear in court and "show cause" why the firm should not be required to comply with an SEC subpoena seeking documents related to DTT's former client, Longtop Financial Technologies Limited, a U.S. public company also based in the PRC and currently under SEC investigation for fraud. While the court's Jan. 4, 2012, order does not compel DTT to produce the documents, but rather to appear in court on the issue, the decision is significant because the SEC had not served DTT directly with either the original subpoena or the order to show cause papers. Instead, the SEC attempted to serve DTT's U.S.-based counsel. Magistrate Judge Robinson upheld service of the order to show cause on DTT's