Puda Coal Inc, one of many Chinese companies to face U.S. regulatory scrutiny over their financial reporting, said it may face an enforcement action by the U.S. Securities and Exchange Commission.
In a statement released Friday night, Puda said it had received a Wells notice on December 28 indicating that the SEC may start proceedings to decide whether to suspend or revoke registrations for its securities because of the company's failure to file timely, audited quarterly and annual reports.
Puda said it has until January 16 to raise any defenses, and is considering its options. The Taiyuan-based company also announced the December 20 resignation of a director, Jianfei Ni.
A U.S.-based spokesman for Puda did not immediately respond to a request for comment.
In September, Puda said an internal probe found that Chairman Ming Zhao had transferred ownership of a large stake in a coal subsidiary to himself in 2009 without seeking formal shareholder approval, and that Chief Executive Liping Zhu was aware of the transaction.
Two months earlier, Puda's auditor Moore Stephens resigned, and said audit reports for the 2009 and 2010 fiscal years should no longer be relied on with respect to the transfer and other suspect transactions.
Puda said it began the probe after a short seller of its stock published an article accusing Ming Zhao of engaging in a number of undisclosed transactions involving the coal unit.
Short-sellers have also issued research targeting many other Chinese companies in which they have short positions. These reports often cause the companies' shares to fall.
Puda shares closed Friday down 2 cents at 48 cents on the Pink Sheets.
(Reporting by Jonathan Stempel in New York; Editing by Bernard Orr)