* Wells notice indicates possible civil charges
* ADRs were delisted; auditor, CFO resigned
* Accounting of many Chinese companies questioned
NEW YORK, Aug 29 - Longtop Financial Technologies Ltd
LGFTY.PK said on Monday it may face civil charges by the U.S.
Securities and Exchange Commission, signaling stepped-up
regulatory enforcement of possible accounting irregularities at
In an SEC filing, the maker of software for Chinese
financial services companies said it received a "Wells notice"
from the SEC on Aug 24. Such a notice indicates that SEC staff
plans to recommend that the Commission take legal action, and
gives a company a chance to mount a defense.
Longtop said the Wells notice stemmed from its May 23
announcement that auditor Deloitte Touche Tohmatsu CPA Ltd had
resigned, and that the company's annual reports from 2008, 2009
and 2010 should not be relied upon. It also said the SEC will
decide whether to suspend or revoke its securities.
In May, Longtop linked Deloitte's resignation to what the
auditor called "recently identified falsity" in company
financial records, and "deliberate interference" by Longtop
management in the audit process. [ID:nL3E7GN1X1] Longtop's
chief financial officer, Derek Palaschuk, resigned that month.
Longtop is among the largest Chinese companies linked this
year to potential accounting fraud, often by research firms and
short sellers such as Citron and Muddy Waters.
Since March, roughly 30 Chinese companies have seen their
auditors resign, and more than two dozen have been delisted
from U.S. exchanges. [ID:nL6E7J11FS]
Based in Xiamen, Longtop had a $1.08 billion market value
prior to a May 17 trading halt. The New York Stock Exchange is
delisting its American depositary receipts. [ID:nL3E7JH1XX] The
ADRs closed Friday at 66 cents on the Pink Sheets.
(Reporting by Jonathan Stempel; Editing by Derek Caney)