Case3:14-cv-00722-SI Document38 Filed07/22/14 Page1 of 24 Laurence M. Rosen (SBN 219683) Phillip Kim (admitted pro hac vice ) Jonathan Stern (admitted pro hac vice) [email protected][email protected][email protected]THE ROSEN LAW FIRM, P.A. 355 South Grand Avenue, 2450 Los Angeles, CA 90071 Telephone: (213) 785-2610 Facsimile: (213) 226-2684 Counsel for Lead Plaintiff and the Class In re MONTAGE TECHNOLOGY GROUP LIMITED SECURITIES LITIGATION This Document Relates To: All Actions 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Master File No 3:2014-cv-0722 (SI) CLASS ACTION UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS 18 1. Lead Plaintiff Martin Graham, and Shaun Shen (“Plaintiffs”) individually and on behalf of 19 all other persons similarly situated, by Lead Plaintiff’s undersigned attorneys, for Plaintiffs 20 complaint against defendants, allege the following based upon personal knowledge as to Lead 21 Plaintiff and Plaintiffs own acts, and upon information and belief as to all other matters based on 22 the investigation conducted by and through Plaintiffs’ attorneys, which included, among other 23 things, a review of the U.S. Securities and Exchange Commission ("SEC") filings by Montage 24 Technology Group Limited (“Montage” or the “Company”), a review of the Chinese State 25 Administration for Industry and Commerce (“SAIC”) 1 filings by Montage Technology (Shanghai) 26 27 1 The SAIC is a governmental authority in the People’s Republic of China that is responsible for a variety of corporate and commercial issues here. Chinese corporations must register with the SAIC upon formation, and must 28 timely disclose a variety of information to the SAIC, including but not limited to: periodic financial statements; changes in ownership; use of corporate stock as collateral for a debt contract; and the identities of corporate officers.
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Case3:14-cv-00722-SI Document38 Filed07/22/14 Page1 of 24
Laurence M. Rosen (SBN 219683) Phillip Kim (admitted pro hac vice) Jonathan Stern (admitted pro hac vice) [email protected][email protected][email protected] THE ROSEN LAW FIRM, P.A. 355 South Grand Avenue, 2450 Los Angeles, CA 90071 Telephone: (213) 785-2610 Facsimile: (213) 226-2684
Counsel for Lead Plaintiff and the Class
In re MONTAGE TECHNOLOGY GROUP LIMITED SECURITIES LITIGATION
This Document Relates To: All Actions
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Master File No 3:2014-cv-0722 (SI)
CLASS ACTION
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF
THE FEDERAL SECURITIES LAWS
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1. Lead Plaintiff Martin Graham, and Shaun Shen (“Plaintiffs”) individually and on behalf of
19 all other persons similarly situated, by Lead Plaintiff’s undersigned attorneys, for Plaintiffs
20 complaint against defendants, allege the following based upon personal knowledge as to Lead
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Plaintiff and Plaintiffs own acts, and upon information and belief as to all other matters based on
22 the investigation conducted by and through Plaintiffs’ attorneys, which included, among other
23 things, a review of the U.S. Securities and Exchange Commission ("SEC") filings by Montage
24 Technology Group Limited (“Montage” or the “Company”), a review of the Chinese State
25 Administration for Industry and Commerce (“SAIC”) 1 filings by Montage Technology (Shanghai)
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1 The SAIC is a governmental authority in the People’s Republic of China that is responsible for a variety of corporate and commercial issues here. Chinese corporations must register with the SAIC upon formation, and must
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timely disclose a variety of information to the SAIC, including but not limited to: periodic financial statements; changes in ownership; use of corporate stock as collateral for a debt contract; and the identities of corporate officers.
Case3:14-cv-00722-SI Document38 Filed07/22/14 Page2 of 24
(“SMMT”), the Hong Kong Companies Registry filings of LQW Technology Company Limited
(“LQW”), and analyst and other media reports about the Company. Plaintiffs believe that
substantial evidentiary support will exist for the allegations set forth herein after a reasonable
opportunity for discovery.
NATURE OF THE ACTION
2. This is a federal securities class action brought on behalf of a class consisting of all persons
and entities, other than defendants and their affiliates, who purchased the securities of Montage
from September 25, 2013 to February 6, 2014, inclusive and did not sell such securities prior to
February 6, 2014 (the "Class Period"). Plaintiffs seek to pursue remedies against Montage, certain
of its officers and directors for violations of the federal securities laws under the Securities
Exchange Act of 1934 (the "Exchange Act").
3. Defendant Montage is a Cayman Islands company, whose shares trade on NASDAQ.
Montage, through its operating subsidiaries, primarily conducts business in China.
4. Montage purportedly engages in the design, development and marketing of various analog
and mixed-signal semiconductor solutions for the home entertainment and cloud computing
markets. Montage’s largest distributor, LQW, is a Hong Kong entity which purportedly accounted
for an overwhelming majority of Montage’s revenue during the Class Period.
5. Throughout the Class Period, Defendants failed to disclose material related party
transactions. Specifically, Montage failed to disclose that it owned and controlled its largest
distributor, LQW, which represented 50% ($39.1 mm) of Montage’s revenue in fiscal 2012, and
67% ($30.4 mm) for the first six months of 2013. Failure to disclose these material related party
transactions is a violation of generally accepted accounting principles (“GAAP”), which rendered
Montage’s financial statements false and misleading at all times.
6. On February 6, 2014, Gravity Research issued a report asserting that Montage’s largest
distributor (LQW) was a related party.
Some of this information is accessible to the public and is used by Chinese investors. Information regarding encumbrance of stock through use as collateral is also available to counterparties considering making loans.
- 2 - CONSOLIDATED AMENDED COMPLAINT -
- NO. 3:14-CV-00722 (SI)
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Case3:14-cv-00722-SI Document38 Filed07/22/14 Page3 of 24
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7. When the market learned of the undisclosed related party transactions that day the
2 Company’s stock price plunged $3.76/share on February 6 and another $1.73/share on February 7,
3 2014, on extremely high volume. In all, Montage’s share price fell 25.9% as a result of the
4 disclosure that LQW was a related party.
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JURISDICTION AND VENUE
6 8. Jurisdiction is conferred by §27 of the Exchange Act. The claims asserted herein arise under
7 §§10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder.
8 9. This Court has jurisdiction over the subject matter of this action under 28 U.S.C. §1331 and
9 §27 of the Exchange Act.
10 10. Venue is proper in this District pursuant to §27 of the Exchange Act and 28 U.S.C. §1391(b)
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as the Company conducts business in this district.
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11. In connection with the acts alleged in this complaint, defendants, directly or indirectly, used
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the means and instrumentalities of interstate commerce, including, but not limited to, the mails,
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interstate telephone communications and the facilities of the national securities markets.
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PARTIES
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12. Lead Plaintiff Martin Graham, as set forth in his Certification previously filed with the
17 Court, which is incorporated by reference herein, purchased the common stock of Montage during
18 the Class Period and has been damaged thereby.
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13. Shaun Shen, as set forth in his Certification attached hereto, purchased the common stock
20 of Montage during the Class Period, and has been damaged thereby.
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14. Defendant Montage is a Cayman Islands company. It purports to be a global fabless
22 provider of analog and mixed-signal semiconductor solutions to the home entertainment and cloud
23 computing markets.
24 15. Montage conducts business in several territories including China, Hong Kong, Taiwan and
25 the United States through its wholly owned subsidiaries. According to the Form S-1 Montage filed
26 with the SEC on January 17, 2014, LQW comprised of approximately half of Montage’s reported
27 revenue for 2012 and approximately 71.0% of Montage’s reported revenue in the first nine months
Case3:14-cv-00722-SI Document38 Filed07/22/14 Page12 of 24
Technology (Shanghai) Co., Ltd and Montage were operated by the same group of people. This
source referred to SMMT as a “shell company established for tax evasion.”
66. CW3, who worked as a client service manager at Montage from 2008 to 2014 said that
LQW was “a Hong Kong company to pass through.”
GAAP REQUIRED DEFENDANTS TO DISCLOSE THE RELATED PARTY
TRANSACTIONS
67. GAAP constitutes those standards recognized by the accounting profession as the
conventions, rules, and procedures necessary to define accepted accounting practices at a particular
time.
68. GAAP are the common set of accounting principles, standards, and procedures that
companies in the United States use to compile their financial statements.
69. The SEC has the statutory authority for the promulgation of GAAP for public companies
and has delegated that authority to the Financial Accounting Standards Board (the “FASB”).
70. SEC and NASDAQ rules and regulations require that publicly traded companies such as
Montage include financial statements that comply with GAAP in their annual and quarterly reports
filed with the SEC. See Sections 12 and 13 of the Exchange Act; Rule 10-01(d) of Regulation SX.
71. SEC Rule 4-01(a) of Regulation S-X states that “[f]inancial statements filed with the
Commission which are not prepared in accordance with generally accepted accounting principles
will be presumed to be misleading or inaccurate.” 17 C.F.R. § 210.4-01(a)(1) (emphasis added).
72. Management retains responsibility for preparing financial statements that conform with
GAAP. The American Institute of Certified Public Accountants (“AICPA”) Professional Standards
provide:
The financial statements are management’s responsibility . . . Management is responsible for adopting sound accounting policies and for establishing and maintaining internal controls that will, among other things, record, process, summarize, and report transactions (as well as events and conditions) consistent with management’s assertions embodied in the financial statements. The entity’s transactions and the related assets, liabilities, and equity are within the direct knowledge and control of management. . . . Thus, the fair presentation of financial statements in conformity with generally accepted accounting principles is an implicit and integral part of management’s responsibility.
AIPCA, Professional Standards, vol. 1, AU § 110.02 (1998).
Case3:14-cv-00722-SI Document38 Filed07/22/14 Page21 of 24
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JURY TRIAL DEMANDED
Lead Plaintiff hereby demands a trial by jury.
Dated: July 22, 2014 Respectfully submitted,
THE ROSEN LAW FIRM, P.A.
/s/ Jonathan Stern Jonathan Stern (admitted pro hac vice) Laurence M. Rosen (SBN 219683) Phillip Kim (admitted pro hac vice) [email protected][email protected][email protected] THE ROSEN LAW FIRM, P.A. 355 South Grand Avenue, 2450 Los Angeles, CA 90071 Telephone: (213) 785-2610 Facsimile: (213) 226-2684
Case3:14-cv-00722-SI Document38 Filed07/22/14 Page23 of 24
Certification and Authorization of Named Plaintiff Pursuant to Federal Securities Laws
The individual or institution listed below (the "Plaintiff') authorizes and, upon execution of the accompanying retainer agreement by The Rosen Law Firm P.A., retains The Rosen Law Firm PA. to file an action under the federal securities laws to recover damages and to seek other relief against Montage Technology Group Limited. The Rosen Law Firm PA. will prosecute the action on a contingent fee basis and will advance all costs and expenses. The Montage Technology Group Limited. Retention Agreement provided to the Plaintiff is incorporated by reference, upon execution by The Rosen Law Firm PA.
First name: Middle initial: Last name: Address: City: State: Zip: Country: Facsimile: Phone: Email:
Shaun
Shen
Ir son""
Plaintiff certifies that:
1. Plaintiff has reviewed the complaint and authorized its filing.
2. Plaintiff did not acquire the security that is the subject of this action at the direction of plaintiff's counsel or in order to participate in this private action or any other litigation under the federal securities laws.
3. Plaintiff is willing to serve as a representative party on behalf of a class, including providing testimony at deposition and trial, if necessary.
4. Plaintiff represents and warrants that he/she/it is fully authorized to enter into and execute this certification.
5. Plaintiff will not accept any payment for serving as a representative party on behalf of the class beyond the Plaintiff's pro rata share of any recovery, except such reasonable costs and expenses (including lost wages) directly relating to the representation of the class as ordered or approved by the court.
6. Plaintiff has made no transaction(s) during the Class Period in the debt or equity securities that are the subject of this action except those set forth below:
Acquisitions:
Type of Security
Buy Date
#ofShares
Price per Share Common Stock
1/24/2014
100
22.95 Common StockBuy Date
#ofShares
Price per Share
Sales
Type of Security
Sale Date
#ofShares
Price per Share
Common StockSell Date # of Shares Price per Share
Case3:14-cv-00722-SI Document38 Filed07/22/14 Page24 of 24
Certification for Shaun Shen (cont.)
7. I have not served as a representative party on behalf of a class under the federal security laws during the last three years, except if detailed below. []
I declare under penalty of perjury, under the laws of the United States, that the information entered is accurate: YES
By clicking on the button below, I intend to sign and execute this agreement and retain the Rosen Law Firm, P.A. to proceed on Plaintiffs behalf, on a contngent fee basis. YES
Signed pursuant to California Civil Code Section 1633.1, etseq. - and the Uniform Electronic Transactions Act as adopted by the various states and territories of the United States.