Chinese companies listed in the United States continue to be targets of securities fraud litigation over alleged failure to sufficiently disclose their financial dealings, according to a new report released by Dechert. As an emerging trend in 2022, the report highlights that an increasing number of lawsuits focused on the initial public offerings of Chinese after-school tutoring companies for the misrepresentation or omission of stringent regulatory requirements by the People’s Republic of China. Tutoring companies have recently been under heightened scrutiny by the Chinese government.
According to the report, 5 out of 11 securities litigation filings targeted Chinese tutoring companies in 2022—a trend in line with The National Law Journal’s previous coverage. While the volume of overall cases filed against Chinese companies stayed about the same year over year, the difference is “there were several cases that focused on alleged misrepresentations relating to those regulations that would then impact the business,” Dechert partner and co-author of the report Joni Jacobsen said.