SEC Administrative Law Judge's Ban on China-Based Affiliates of Major Accounting Firms Raises Challenging Conflicts of Law Issues (with Link to Article by Brad Bondi and Chris Jones)

Cadwalader attorneys Brad Bondi and Christopher Jones authored an article in Law360 regarding the January 23, 2014 Order, issued by Administrative Law Judge Cameron Elliot, that banned China-based affiliates of the Big Four accounting firms from practicing or appearing before the SEC for a period of six months.

In effect, the Order prohibited the firms from performing any work for China-based companies that trade on U.S. exchanges for the period of the ban. It came after lengthy negotiations – between SEC Staff, the firms and Chinese regulators – over audit work papers which the SEC sought in order to further its investigations into ten companies that were clients of the accounting firms. According to the article, the firms faced a difficult situation because compliance with the SEC requests would have exposed them to criminal and civil penalties under Chinese Law.

Ultimately, the Order may be vulnerable on appeal because a court applying a conflicts of law analysis may find that the more stringent Chinese laws would trump the U.S. government's interest in obtaining the work papers.

Click here to view the article authored by Brad Bondi and Christopher Jones (originally published in Law360).