The U.S. Securities and Exchange Commission urged Alibaba Group Holding Ltd. to hand over more information regarding its dealings with a Chinese regulator alleged to have involved counterfeit goods.
The Wall Street Journal reported that the e-commerce firm "has received correspondence from the [SEC] asking for background facts and other information" linked with their business relations with a Chinese regulator.
Alibaba clarified the SEC hasn't accused them of any securities law violations. The company's decision to disclose the SEC letter was done to "help avoid false rumors or speculation."
Alibaba is already cooperating with the SEC regarding the issue. Meanwhile, word from the SEC has yet to be received.
This SEC request was forwarded to Alibaba after the State Administration for Industry and Commerce of China posted a "white paper" on the Web in January.
The paper showed how Alibaba and the Chinese agency engaged in business talks even before the e-commerce firm's public offering at the New York Stock Exchange in September 2014. The initial public offer came to a record-breaking $25 billion.
Alibaba slammed speculation of anomalous dealings, stating the talks with the regulator were necessary parts of normal business. These talks aren't required to be included in its IPO prospectus, the company said.
Based on the U.S. rules on securities, companies need to include in their IPO prospectuses any legal matters damaging to the entity.
The company's prospectus, however, detailed how management dealt with concerns over the alleged sales of fake goods alongside other illegal activities in the virtual marketplace.
Alibaba said it only learned about these allegations when they were made public through the Web. But it felt justified when the Chinese regulator pulled down the white paper from its website.
To further counter the allegations, Alibaba said its top officials have been closely coordinating with the Chinese government to fight the selling of counterfeit items and to improve market safeguards for consumers.
CEO Jack Ma and Zhang Mao, the Chinese regulator's top official, have decided to work hand in hand to resolve the issue and address the consequences of selling fake goods.
Since the release of the white paper online, Alibaba's shares dropped until it recovered on Feb. 13 when it increased by 2.2 percent.
Its earnings report also showed its profit for the last quarter of 2014 fell 28 percent compared to the same period in 2013. Alibaba's stock has fallen 13 percent since late January. The statistic is 31 percent higher than its IPO price.