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Might Sinovac Become The First Chinese Issuer To Resolve An FCPA Enforcement Action?


A long, long time ago (September 2009 to be exact) FCPA Professor highlighted how Chinese companies were increasingly seeking to raise capital in the U.S. and by registering securities in the U.S. becoming subject to a variety of U.S. laws including the Foreign Corrupt Practices Act.

There has never been an FCPA enforcement against a Chinese-based issuer, but that could change.

This post highlights the FCPA scrutiny of Beijing-based Sinovac Biotech, a company with shares traded on NASDAQ, including its recent disclosure that it is unable to file its annual report because of a bribery internal investigation.

In late December 2016 Geoinvesting published a report suggesting that :recently disclosed court documents show that Sinovac Biotech’s CEO [a Beijing based company with shares traded on NASDAQ] bribed a member of the Chinese Food and Drug Administration to assist its vaccine clinical trial and approval.”

Recently Sinovac disclosed:

“[T]hat it is delaying its Annual Report on Form 20-F for the year ended December 31, 2016 (the “2016 Annual Report”) and that it received a written notice from the Listing Qualifications Department of The Nasdaq Stock Market (“NASDAQ”).

On May 1, 2017, Sinovac filed a Form 12b-25, Notification of Late Filing, with the Securities and Exchange Commission (the “SEC”) regarding the delayed filing of its 2016 Annual Report. Sinovac does not expect that it will be able to file the 2016 Annual Report within the 15-day extension period. The Company’s Audit Committee requires additional time for its internal investigation regarding allegations raised in a research report by Geoinvesting. The investigation has slowed completion of the Company’s financial statements and audit for the year ended December 31, 2016. Management and the Audit Committee of the Company’s Board of Directors are continuing to work diligently to complete its 2016 Annual Report and file it with the SEC as soon as possible.

After the Company publicly announced the internal investigation arising from the Geoinvesting article, the SEC staff notified the Company of an enforcement inquiry related to the matters discussed in the article. The SEC staff subsequently issued a subpoena requesting documents related to the internal investigation. The Company, at the direction of the Audit Committee and with the assistance of independent counsel, is cooperating with the SEC in response to the staff’s requests for information.”

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