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Newbriefs, September 15, 2011

SEC NEWS

SEC Files Subpoena Enforcement Action Against Deloitte Touche Tohmatsu
The SEC filed a subpoena enforcement action on Sept. 8, 2011, against Deloitte Touche Tohmatsu CPA Ltd. for failing to produce documents related to the SEC’s investigation into possible fraud by the Shanghai-based public accounting firm’s longtime client Longtop Financial Technologies Ltd. According to an article  in the SEC News Digest, the SEC issued a subpoena May 27, 2011, requiring D&T Shanghai to produce documents by July 8, 2011. Deloitte was instrumental in exposing Longtop’s alleged accounting fraud, so it is curious it has not turned over the papers in a timely manner.

The SEC article indicated D&T Shanghai is in possession of “vast amounts of documents” responsive to the subpoena. It has not produced any document to the date of the latest SEC action, hence the SEC’s investigation into the Longtop malfeasance matter, is stymied.

According to the article, D&T Shanghai was Longtop’s auditor since at least 2007. On May 22, D&T Shanghai resigned as Longtop’s auditor after discovering numerous improprieties during an audit for the year ended March 31, 2011. From the article: “In its resignation letter, which was included in a Form 6-K furnished by Longtop on May 23, D&T Shanghai identified numerous indicia of financial fraud at Longtop and indicated that D&T Shanghai’s prior year audit reports for Longtop could no longer be relied upon by investors.”

The article also outlined that according to court papers, these documents may reveal information about, 1) D&T Shanghai’s discovery of false financial records at Longtop; 2) how any fraud schemes at Longtop were able to continue undetected; 3) and basic information necessary to ferret out whether there was a fraud, who was behind it, how significant it was, and how it was conducted.
To read the SEC News Digest article, visit: http://www.sec.gov/news/digest/2011/dig090811.htm

Related Story: SPECIAL REPORT: Who is Longtop’s Derek Palaschuk?

SEC Forms Advisory Committee on Small & Emerging Companies
The SEC announced on Sept. 13, 2011, that it had formed an Advisory Committee on Small and Emerging Companies to focus on interests and priorities of small businesses and smaller public companies. The advisory committee will advise and consult with the Commission on such issues as: 1) Capital raising through private placements and public securities offerings; 2) Trading in the securities of small and emerging and small publicly traded companies; 3) Public reporting requirements of such companies. The committee is intended to provide a formal mechanism through which the Commission can receive advice and recommendations specifically related to privately held small businesses and publicly traded companies with less than $250 million in public market capitalization. John J. Borer III, Senior Managing Director and Head of Investment Banking, Rodman & Renshaw LLC, and a familiar name to those in the sector of China-based/U.S. listed companies is one of the committee members.

MARKET MOVES

Cleantech Receives Notice of Non-Compliance
Wuxi-based Cleantech Solutions International Inc. (Nasdaq: CLNT)(formerly China Wind Systems [CWS]) has received a notice of non-compliance from Nasdaq, stating the company has has failed to comply with the $1.00 minimum bid price required for continued listing on The Nasdaq Global Market. The company failed to meet this test because the closing bid price for the company’s common stock for each trading day in the 30 day period from July 27, 2011 to September 7, 2011 was less than $1.00 per share.

Charm Communications Inc. Announces US$10 Million Share Repurchase Program
The board of Beijing-based advertising agency Charm Communications Inc. (Nasdaq: CHRM) has approved a share repurchase program of up to U.S. $10 million of its issued and outstanding American Depositary Shares (ADS). The company will implement the program with an initial duration of 12 months. The repurchases will be made from time to time either on the open market at prevailing market prices or in block trades. The timing and extent of any purchases will depend upon market conditions, the trading price of its ADSs and other factors. The board of directors will periodically review the program and make adjustments to the share repurchase plan’s terms and size. The board may also suspend or discontinue the repurchase program at any time. The company expects to pay for the repurchased shares using internally available cash.

PEOPLE

China Sky One Medical Loses Two Directors; Appoints Replacements
Harbin-based China Sky One Medical Inc. (Nasdaq: CSKI) announced that Stanely Hao has resigned his positions as Vice President, Secretary and Director of the company. In addition, Ms. Xiao-yan Han has resigned from her positions as Vice Chairman and Director. The company appointed Mr. Jian-ping Li and Mr. Wen-chao Zhang as Directors to fill the vacancies. Mr. Jian-ping Li joined the company in 2010 as general manager in charge of the company’s manufacturing facilities. Prior to that he worked as technologist at Harbin Pharmaceutical Group and Longgui Pharmacuetical Company, as CEO. Wen-chao Zhang joined the company in March 2006 as chief engineer. Prior to that, he was chief engineer at Global Green Technology Group.

DEALS
Kangtai Cactus Signs Sales Agreement With Two German Companies
Harbin-based China Kangtai Cactus Biotech Inc. (OTC BB: CKGT) has signed sales agreements with Apollo Duty Free Shop GMBH and Tobosst Duty Free Shop GMBH, two large duty-free stores in Frankfurt, to sell Kangtai’s cactus-based “Sheng Cao” cigarettes in Germany. The company also invited several German tobacco dealers to help the company improve the taste and smell of “Sheng Cao” to enhance its quality. The company signed the agreements with the two duty-free companies in August and expects new revenue from the German market will be approximately 2.7 million EUR annually (Approximately $3.7 million USD). Kangtai has initiated discussions with these two companies about possible sales of cactus powder and neutraceuticals. [Note: CBK could not confirm the agreement with Apollo or Tobosst.]