This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

SEC's Smart Step at Fighting China Fraud

Stocks in this article: RINO CEU

Well, I guess that PCAOB took that to mean the case was closed. No action was taken against Sherb. Sherb's five current Chinese clients include China Education Alliance (CEU), which recently came under fire from a short-seller for having a nonfunctioning office and Web site.

The SEC oversees the PCAOB and the securities that get sold in this country. I believe the Commission needs to directly (or get the PCAOB to) audit these audit firms and shut them down if it finds they're operating in a "pay to play" manner. That's exactly what the SEC has done with Moore Stephens (although this fine and ban was for only one office of the company, not its entire network of offices).

If the SEC finds evidence of misrepresentations in these Chinese companies' financial statements (or disclosures around related-party transactions), it should seek to delist them. I believe the SEC also should force the exchanges to start asking more difficult questions before accepting these uplistings from the OTC.

If I worked at the SEC, I would begin by focusing on the following audit firms and their work in China:

  • Frazer Frost
  • Moore Stephens (not just the Orange County office but all of its offices)
  • Kabani & Co.
  • Sherb & Co.
  • Child Van Wagoner & Bradshaw
  • Marcum Josephson (formerly Stonefield Josephson)
  • Alliott AGCA Inc.
  • Jimmy CH Cheung & Co.

China will continue to receive enormous interest from American investors -- both institutional and retail -- in the coming decade. There are many ethical and well-managed Chinese companies. But there are bad apples -- not just over in China, but also right here in the U.S. among the service providers like these small auditors. The area deserves to be cleaned up, and I'm heartened to see the SEC move this week to do so.


At the time of publication, Jackson had no positions in companies mentioned in this article.

Eric Jackson is founder and president of Ironfire Capital and the general partner and investment manager of Ironfire Capital US Fund LP and Ironfire Capital International Fund, Ltd. You can follow Jackson on Twitter at or @ericjackson

3 of 3

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs