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U.S. criminal authorities are investigating accounting irregularities at Chinese firms listed on U.S. stock exchanges, Reuters is reporting on Thursday afternoon, and the news is having a big impact on a number of Chinese stocks even though no names have been mentioned in the report. Market Beat noted that Youku.com is down 22 per cent, Spreadtrum is down 13 per cent, Baidu is down 12 per cent and SINA is down 10 per cent.

The news follows the tremendous shock in the summer when a short-seller alleged that Sino-Forest Corp. -- based in China but listed in Toronto -- was inflating certain aspects of its business. Those allegations led to the Ontario Securities Commission putting a halt on trading activity until the end of the year, and left a number of Chinese companies looking guilty just by having a dual-listing.

From Reuters: "'There are parts of the Justice Department that are actively engaged in this area,' said Robert Khuzami, director of enforcement at the U.S. Securities and Exchange Commission.

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In an interview with Reuters this week, Khuzami revealed that a number of federal prosecutors around the country are looking into the issue, but declined to name them.

The involvement of the Justice Department adds investigative firepower to the SEC and the FBI, which are also probing Chinese accounting fraud."

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About the Author
Investing Reporter

David Berman has been writing about business and investing since 1995. He has written for a number of magazines, including Canadian Business and MoneySense. He worked at the Financial Post as an investing writer and daily columnist before moving to the Globe and Mail in 2008. More

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