Long v. Fanhua, Inc. et al 1:18-cv-08183-PAE — On September 7, 2018, investors sued Fanhua, Inc. (Fanhua, FANH, or the Company) in United States District Court, Southern District of New York. The FANH class action alleges that plaintiffs acquired Fanhua’s American depositary shares (ADS) at artificially inflated prices between April 20, 2018 and August 27, 2018 (the “Class Period”). They are now seeking compensation, within the Fanhua Lawsuit, for financial losses incurred upon public revelation of the Company’s alleged misconduct during that time. For more information about the Fanhua Class Action (FANH Lawsuit), please contact us today!

Summary of the Allegations

Company Background

Founded 20 years ago, the Company (NASDAQ: FANH), used to be known as CNinsure, Inc. It bills itself as a “leading independent online-to-offline (“O2O”) financial services provider.”

As such, Fanhua provides “a wide variety of life and property and casualty insurance products, and provide insurance claims adjusting services” through its online platforms and offline sales and service network.

By the end of June 2018, Fanhua claims, it had nine insurance agencies “including two with national operating licenses and three insurance claims adjusting companies.” The company also claims that it employed more than 630,000 sales agents and more than 1,100 claims adjusters at that time. Finally, the Company boasts it had more than 680 sales and service centers in 31 provinces across China by the end of June.

Summary of Facts

Fanhua and two of its senior officers (the “Individual Defendants”) are now accused of deceiving investors by lying and withholding critical information about the Company’s business practices during the Class Period.

Specifically, they are accused of omitting truthful information about Fanhua’s business and accounting practices from SEC filings and related material. By knowingly or recklessly doing so, they allegedly caused Fanhua’s ADS to trade at artificially inflated prices during the time in question.

The truth came out on August 27, 2018, when stock analyst Seligmen Investments published an article describing Fanhua as a “questionable company.” The article also examined “a history of alleged fraud within the Company, including accounting regularities in the Company’s second quarter 2018 financial results.”

A closer look…

As alleged in the September 7 complaint, the Company and/or Individual Defendants repeatedly made false or misleading public statements during the Class Period.

For instance, on a form filed with the SEC on April 20, 2018, the Company said in relevant part: “The audit committee oversees our accounting and financial reporting processes and the audits of the financial statements of our company.”

On the same form, the Company listed the committee’s responsibilities. Of relevance here is the Company’s assertion that the committee is responsible for, “reviewing and approving all proposed related-party transactions,” and “reviewing major issues as to the adequacy of our internal controls and any special audit steps adopted in light of material control deficiencies.”

Finally, on August 21, 2018, the Company filed a form announcing its financial results for the second quarter of 2018 with the SEC. While commenting on the performance, one of the Individual Defendants said in pertinent part: “Total life insurance premiums reached RMB 1.5 billion, up 69.8% year-over-year, outpacing the overall industry growth rate. This was driven by the strong growth across all of the key operational metrics in our life insurance segment.”

Impact of the Alleged Fraud on Fanhua’s ADS Price and Market Capitalization

The following chart illustrates the stock price during the class period:

Actions You May Take

If you have purchased shares during the Class Period, you may join the class action as a lead plaintiff, remain a passive class member, or opt out of this litigation and pursue individual claims that may not be available to the class as a whole.

NOTE: The deadline to file for lead plaintiff in this class action is November 6, 2018. You must file an application to be appointed lead plaintiff prior to this deadline in order to be considered by the Court. Typically, the plaintiff or plaintiffs with the largest losses are appointed lead plaintiff.

In order to identify your potential exposure to the alleged fraud during the time in question, you may wish to perform an analysis of your transactions in Fanhua ADS using court approved loss calculation methods.

Recently Filed Cases

Listed below are recently filed securities class action cases being monitored by us, along with the class period and the deadline to file a motion to be appointed as the Lead Plaintiff in the action.  Please contact us if you would like an LK report for any of these cases:

About Us

Levi & Korsinsky is a leading securities litigation firm with a hard-earned reputation for protecting investors’ rights and recovering losses arising from fraud, mismanagement and corporate abuse.  With thirty attorneys and offices in New York, Connecticut, California and Washington D.C., the firm is able to litigate cases in various jurisdictions in the U.S., England, and in other international jurisdictions.

Levi & Korsinsky provides portfolio monitoring services for high-net worth investors and institutional clients.  Our firm also assists investors in evaluating whether to opt-out of large securities class actions to pursue individual claims.

For additional information about this case or our institutional services, please contact us.