Focus on China Compliance - Fall 2014

McDermott Will & Emery
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In This Issue:

- Between a Rock and a Hard Place: Navigating Disclosures to U.S. Regulators Within the Framework of China’s State Secrets Law

- Internal Investigations in China: Collecting and Reviewing Digital Evidence

- Using Internal Controls to Mitigate FCPA/Corruption Risks in China

- Government Investigations in China: How to Navigate a Complex Network

- Catching Tigers and Flies: A European View on Compliance in China

- Excerpt from Between a Rock and a Hard Place: Navigating Disclosures to U.S. Regulators Within the Framework of China’s State Secrets Law:

U.S. Securities and Exchange Commission (SEC)-registered companies operating in China face unique challenges when responding to requests for documents from U.S. regulators. Under China’s State Secrets Law, Chinese companies cannot disclose any document that contains “state secrets” without prior authorization from the Chinese government. China’s broad prohibition on disclosure of state secrets may encompass workpapers and other documents prepared in the course of audits of the financial statements of Chinese issuers or material subsidiaries. However, U.S. regulators believe that reviewing workpapers and other documents is a fundamental component of investigating potential misconduct and ensuring the quality of the audit work.

As a result, U.S. regulators will likely continue to request workpapers and other documents from the auditors of U.S.-listed Chinese companies. Such requests place the companies and their audit firms in a difficult position. If the firms comply with the requests, they risk violating Chinese law and incurring severe sanctions, including potential imprisonment of individual partners. Although U.S. and Chinese regulators are working to address the tension between U.S. and Chinese law, companies can take steps to mitigate their risks until the issue has been resolved.

Please see full publication below for more information.

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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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