Who should take responsibility for these problems?

[caption id="attachment_1567" align="alignright" width="192" caption="Photo by ~yienshawn92~"][/caption] I was disappointed to learn about the problems at FibreChem yesterday but am glad that the independent directors have taken decisive action such as the appointment of N-Tan to investigate the matter.   But these are events are after the fact......I think the authorities/regulators should look at these three companies and see if there is a flaw in the oversight structures that we have in place now in particular the Audit Committees given that all these companies embraced a the Code of Corporate Governance fully. The share price charts below show that all three stocks have collapsed and are now suspended.   I think minority shareholders have a choice but to let investigations and restructuring plans proceed before the shares can be relisted. We cannot run away from corporate fraud no matter what regulations are put into place.  The US market is a classic example of how high levels of oversight incuding Sarbanes Oxley have not prevented the emergence of fraud.  The key is to balance sufficient oversight structures, deterrance through through the Courts if fraud has been committed in terms of punitive punishment and the costs of such oversight such that it doesnt significantly impact the companies profitability and thus return to shareholders. The annual reports of 2007 for Ferro China, China Print & Dyeing and FibreChem are attached here. The following data on each company from their 2007 annual report is for reference: a) China Print & Dyeing Issue manager: Kim Eng Capital Auditor: Foo Kon Tan Grant Thornton Independent directors: Lim Jit Poh, Lie Yoke Phing, Tan Sek Khee and Sun Xiaoxia b) Ferro China Issue manager: Westcomb Auditor: Deloitte & Touche Independent directors: Eric Low Siak Meng, Low Seow Juan and Loo Choon Chiaw c) FibreChem Issue manager: Hong Leong Finance/Stirling Coleman Capital Auditor: Deloitte & Touche Independent directors: Ong Tiong Seng, Lim Chin Tong and Dr Chong Weng Chiew At a glance, I cant find anything common in between the three companies other than their sharp price decline and the fact that they are suspended.  For investors, I would expect that the higher incidence of corporate fraud from China or S shares means that investors would demand a higher risk premium for such stocks, ie a lower fair value PER in the beginning which will slowly rise if  the company and management can demonstrate strong corporate governance and win investor trust and confidence.  Like my golf partner, this incident will force more investors to avoid China stocks altogether even though valuations, balance sheets and earnings look extremely attractive. Source: NRA Capital - Kevin’s Blog