On June 9, 2011, the Securities and Exchange Commission (SEC) issued an Investor Alert warning investors of the risk of investing in foreign companies who enter the U.S. markets through reverse merger transactions. This alert appears to have been prompted by the significant numbers of China-based operating companies that have recently been suspended from trading by the SEC as a result of discoveries of false or misleading financial statements or other SEC filing irregularities and the resignation of a number of auditing firms that have uncovered misrepresentations by company management and oftentimes the companies’ Chinese bank branches. ...

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