Start thinking now: how to mitigate legal risks involved in the public offering process

Chinese enterprises have been gaining listings on U.S. exchanges at an increasing rate. According to Reuters, Chinese initial public offerings were some of the best performers in the U.S. in 2009, but also some of the worst. So it is suggested that underwriters be more cautious in 2010.

The reason behind this is because Chinese enterprises are growing at a rapid rate and eager to raise capital in the U.S. However, existing problems such as a lack of an internal control system and knowledge about disclosure requirements are the main reason that more and more Chinese enterprises are getting involved in class action lawsuits. Data have shown that about 11.5% of NYSE-listed Hong Kong and Chinese companies were involved in class actions. And in NASDAQ, the percentage is even higher, at 17.2%.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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