WASHINGTON U.S. regulators and Deloitte's Chinese unit have resolved a legal dispute over access to audit work papers related to a fraud investigation into Longtop Financial Technologies, a Chinese company.
The Securities and Exchange Commission and Deloitte Touche Tohmatsu CPA Ltd on Monday filed a joint motion to have the lawsuit, which was more than two years old, dismissed in U.S. District Court for the District of Columbia.
The SEC told the court that Chinese regulators have since turned over many of the documents being sought.
"In light of the substantial volume of documents produced ... the SEC, at present, does not believe that there is a need for judicial relief," the motion said.
The SEC's case against Deloitte is one of two enforcement matters the agency has been pursuing in its quest to obtain the audit documents of Chinese companies listed in U.S. markets.
In a major move in the second big case involving the Chinese units of the "Big Four" global accounting firms, an SEC administrative law judge last week ruled that those units should be suspended from practicing in the United States for six months. The judge ruled that the units had failed to comply with similar SEC document requests in connection with nine Chinese companies.
The suspension will not go into effect, however, until the appeals process is exhausted. The Chinese units have all said they plan to appeal. In addition to Deloitte, the Big Four are PricewaterhouseCoopers, KPMG and Ernst & Young.
The Deloitte case resolved on Monday differs because the SEC was only trying to enforce a subpoena. In the other case, the agency was seeking to punish the accounting firms for failing to comply with U.S. laws.
The SEC has been testing out a variety of enforcement and diplomatic tactics to get the audit paperwork it needs to investigate a rash of accounting scandals that have plagued many China-based companies listed in the United States.
The accounting firms, however, have resisted amid concerns they may violate Chinese secrecy laws by sharing the paperwork with the U.S. government.
Last July, the United States and China struck an agreement in connection with the investigation into Longtop, a technology company. Chinese regulators handed over 200,000 pages to the
In Monday's filing, the SEC told the court it had received additional paperwork from Chinese regulators earlier this month.
Although the SEC agreed to drop its case against Deloitte for now, the agency said it may seek the court's help down the line if the materials it received prove inadequate.
The dismissal of the case is still subject to court approval.
(Reporting by Sarah N. Lynch; Editing by Jonathan Oatis)