With regulatory scrutiny on the rise, overseaslisted Chinese firms are increasingly in need of cross-border legal representation. To address this trend – which reflects the massive regional personnel realignments in reaction to mainland growth – DLA Piper has formed its China Securities Litigation Rapid Response Team, a multi-jurisdictional group of litigators and former Securities and Exchange Commission (SEC) enforcement attorneys. “Many of these lawyers are multilingual, and have practised in multiple countries,” says Christopher Clarke, the Hong Kong partner for the team. He swaps e-mails with Rick Gangwani.
What is the role of the team?
It's a cross-border team whose role is to respond at very short notice on behalf of a specific category of clients - typically US-listed companies, Hong Kong-listed companies and reverse takeover (RTO) firms - when they are subject to attacks by short-sellers, Securities and Exchange Commission [of the United States] and Securities and Futures Commission [of Hong Kong] and the Hong Kong Monetary Authority or US class-action lawsuits.
Why the need for a 'rapid response'?
Over the last few months, there has been an enormous increase in the number of short selling attacks on RTOs and, more recently, US and Hong Kong-listed companies.
The management and board of directors of these companies need urgent advice, very often on a number of different issues simultaneously.
Can you speculate on the reasons for the increase in such attacks against mainland companies listed on stock exchanges overseas?
A lack of understanding on the part of management of these companies for the need for good corporate governance, transparency and accuracy of information; a lack of experience in running and managing listed companies; and an increase in the evidence of fraud with some companies.
What skill sets are required to be part of such a team?
A good understanding of corporate governance issues, class-action lawsuits, and regulations affecting listed companies. Specialised investigation capability is also required, as is language and local knowledge.
How do the team's services differ from those of other practices?
We are one of the few firms with specialist lawyers - with local knowledge - and with the bench strength to respond to these short-selling attacks simultaneously in different jurisdictions.
Do you foresee the need for additional forms of regulatory services?
Definitely, [largely due to] expanded anti-bribery laws and competition. The Office of Foreign Assets Control and now the Foreign Account Tax Compliance Act [of the US] are good examples [of where services may be needed].
Also, on cross-border data-privacy issues.
What kind of expertise is required to address this need?
A good understanding of these foreign laws and how they impact locally and expertise in the relevant jurisdictions.
You need to have lawyers with the practical experience of doing similar work in different jurisdictions so you can have the best of both worlds.
For example, a team that has experience in handling China-related anti-bribery issues, staffed with lawyers who have also handled similar cases in different countries such as Hong Kong, Singapore and US, would be ideal.