Tong Daochi, director general of the CSRC spoke in Hong Kong on Wednesday, November 28, at a conference. I was not at the conference, but I obtained a transcript of his remarks from someone who was.
The SEC filed its charges the following Monday, yet it appears Tong was trying to calm the markets. I don't know what days the SEC and PCAOB met with the CSRC in Washington that week, but if it was Tuesday, Tong had little time to prepare his remarks. Of course, if the CSRC knew what they would do in Washington, this could have been a preemptive strike.
Here is what he said:
The audit papers are very important to maintain market integrity and CSRC is ready to co-operate with other jurisdictions on this issue.
Audit working papers are an important document in investigations and enforcement to act on fraud. The issues come up not only with the U.S., but also with Hong Kong and other jurisdictions as well. We have about 1000 companies listed overseas, but numerous companies go around our regulations by listing and registering in other jurisdictions such as the Cayman Islands.
The issues come up when they get it wrong with other regulations and are listed otherwise and we may have difficulties in finding the information for those guys. There are difficulties we are facing in dealing with other jurisdictions, but we are trying to find a way in how we can co-operate and smooth the co-operation mechanism to deliver audit working papers to our counterparts in other jurisdictions.
We share the same objectives and we have zero tolerance for financial fraud for any public companies. We share the common objectives of protecting investors including foreign investors. CSRC is ready to work with any other jurisdiction.
The difficulty is there are some kind of legal issues we need to handle both in China and in other jurisdictions. There are domestic laws and regulations sometimes may have differences interpretations, so we need to solve some of the issues then go through certain procedures before we can deliver the audit papers.
We have engaged with the SEC, SFC, and PCAOB on audit working papers and we are making progress and I think we should be able to work out a way to get them out.
Tong was on a panel with Elizabeth Jacobs, Deputy Director the SEC's Office of International Affairs, who had no comment.