Cloopen Reaches Settlement with U.S. Securities and Exchange Commission

Rhea-AI Summary

Cloopen Group Holding Limited (OTC: RAASY) has reached a settlement with the U.S. Securities and Exchange Commission (SEC) regarding employee misconduct and transaction irregularities. The SEC considered the company's prompt self-reporting and substantial cooperation, leading to the cessation of violations without civil penalties. CEO Changxun Sun emphasized the company's commitment to improving internal controls and creating value for customers and shareholders.

Positive

• None.

Negative

• The settlement may indicate underlying issues within the company's internal controls and operations, which could potentially impact future business operations and financial performance.

Legal Expert

The settlement between Cloopen Group Holding Limited and the SEC is a significant legal resolution that has implications for the company's governance and compliance practices. The absence of civil penalties, due to the company's proactive measures such as self-reporting and cooperation, reflects a growing trend in regulatory enforcement where incentives are provided to companies that demonstrate responsible behavior post-violation. This is in line with the SEC's efforts to encourage self-policing among corporations, which can lead to a more efficient regulatory process and potentially lower costs for the offending company.

However, the requirement to cease and desist from future violations indicates that the SEC is maintaining a strict stance on compliance with federal securities laws. This resolution could serve as a deterrent to other companies, emphasizing the importance of robust internal controls and the high costs associated with compliance failures. From a legal standpoint, the company's actions to strengthen accounting controls and hire staff with GAAP expertise are essential steps in preventing future legal and financial repercussions.

Financial Analyst

From a financial perspective, the settlement with the SEC removes a significant cloud of uncertainty that has been hovering over Cloopen since the disclosure of employee misconduct. The resolution of such legal issues can often lead to a positive reaction in the stock market, as investors gain confidence in the company's ability to manage internal crises and mitigate legal risks. Moreover, the decision by the SEC not to impose civil penalties can be interpreted as a positive signal regarding the company's financial health, as it may preserve capital that can be reinvested into the business or returned to shareholders.

Investors should note that the company's commitment to improving internal controls and adherence to GAAP could result in more transparent and reliable financial reporting in the future. This reliability is crucial for informed investment decisions and could potentially enhance the company's valuation and investor appeal in the long term. Nonetheless, the market will likely continue to monitor Cloopen's adherence to the settlement terms and the effectiveness of its enhanced controls.

Market Research Analyst

Looking at the broader market impact, Cloopen's settlement with the SEC may influence the competitive landscape of the industry. As the company redirects its focus towards business and future developments, it may regain competitive momentum lost during the investigation period. The emphasis on internal control improvements could also lead to operational efficiencies that might give Cloopen a strategic advantage over competitors who have yet to face such scrutiny.

Additionally, the company's experience may serve as a case study for best practices in crisis management and regulatory compliance for other firms in the sector. This could contribute to a shift in industry standards towards greater transparency and accountability. Stakeholders in similar companies should be aware of these developments, as they may affect industry-wide expectations and norms regarding corporate governance and financial reporting.

BEIJING, Feb. 7, 2024 /PRNewswire/ -- Cloopen Group Holding Limited (OTC: RAASY) ("Cloopen" or the "Company") today announced that it has reached a settlement (the "Settlement") with the U.S. Securities and Exchange Commission (the "SEC") regarding the employee misconduct and transaction irregularities disclosed in the press release issued by the Company on May 3, 2022.

In settling this matter, the SEC considered the Company's prompt self-reporting to the SEC staff, and the substantial cooperation provided by the Company throughout its investigation. The SEC also considered the prompt remedial measures undertaken by the Company, including, among others, terminating or disciplining the people involved in the fraudulent scheme, reorganizing the departments engaged in the misconduct, strengthening its accounting controls, and recruiting new finance and accounting staff with expertise in U.S. Generally Accepted Accounting Principles.

Under the terms of the Settlement, the Company, without admitting or denying the findings of the SEC, consented to the entry of an order by the SEC that it shall cease and desist from committing or causing any violations and any future violations of certain federal securities laws, including Section 10(b) of the Securities Exchange Act of 1934, as amended. The SEC is not imposing civil penalties against the Company because of its self-reporting, cooperation and remediation.

Mr. Changxun Sun, chief executive officer of Cloopen, commented, "The settlement indicates our cooperation and remedial efforts during the process, as well as our continued commitment to improving our internal controls. Going forward, we will focus more on our business and future developments, and continue to create value for our customers and shareholders."

About Cloopen Group Holding Limited

Cloopen Group Holding Limited is a leading multi-capability cloud-based communications solution provider in China offering a full suite of cloud-based communications solutions, covering communications platform as a service (CPaaS), cloud-based contact centers (cloud-based CC), and cloud-based unified communications and collaborations (cloud-based UC&C). Cloopen's mission is to enhance the daily communication experience and operational productivity for enterprises. Cloopen aspires to drive the transformation of enterprise communications industry by offering innovative marketing and operational tactics and SaaS-based tools.

For more information, please visit https://ir.yuntongxun.com.

Forward-Looking Statements

This press release contains forward-looking statements made under the "safe harbor" provisions of Section 21E of the Securities Exchange Act of 1934, as amended, and the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "confident" and similar statements. Cloopen may also make written or oral forward-looking statements in its reports filed with or furnished to the SEC, in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Any statements that are not historical facts, including statements about Cloopen's beliefs and expectations as well as its financial outlook, are forward-looking statements. These forward-looking statements are based on Cloopen's current expectations and involve factors, risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Further information regarding these and other risks, uncertainties or factors is included in Cloopen's filings with the SEC. All information provided in this press release is current as of the date of the press release, and Cloopen does not undertake any obligation to update such information, except as required under applicable law. All forward-looking statements are qualified in their entirety by this cautionary statement, and you are cautioned not to place undue reliance on these forward-looking statements.

For investor and media inquiries, please contact:

Cloopen Group Holding Limited
Investor Relations
Email: ir@yuntongxun.com

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SOURCE Cloopen Group Holding Limited

What is the ticker symbol for Cloopen Group Holding Limited?

The ticker symbol for Cloopen Group Holding Limited is RAASY.

What was the settlement with the SEC about?

The settlement with the SEC was regarding employee misconduct and transaction irregularities.

Was the company imposed civil penalties by the SEC?

No, the SEC did not impose civil penalties against the company due to its self-reporting, cooperation, and remediation.

Who commented on the settlement?

Mr. Changxun Sun, the chief executive officer of Cloopen, commented on the settlement, emphasizing the company's commitment to improving internal controls and creating value for customers and shareholders.