A class-action lawsuit was filed against Lufax Holding Ltd. (NYSE: LU) after the company disclosed its auditor had resigned due to concerns over undisclosed transactions, causing shares to fall nearly 14%.
"We're investigating whether Lufax intentionally violated applicable accounting rules and disclosure requirements when it comes to full transparency about related-party transactions," Reed Kathrein, a partner at Hagens Berman, one of the firms that filed suit, said in a statement.
The lawsuit alleges that Lufax, a financial services enabler in China, failed to disclose inadequate internal controls and that its financial results were materially misstated during the Class Period from April 7, 2023, to January 26, 2025. The issues came to light on January 27, 2025, when Lufax announced the removal of PricewaterhouseCoopers (PwC) as its auditor. PwC stated its audit opinions for 2022 and 2023 could no longer be relied upon, sending Lufax ADSs down 13.8% to close at $2.49.
The legal action seeks to represent investors who suffered significant losses and names a lead plaintiff deadline of May 20, 2026. The complaint highlights that PwC had questioned the independence of the company's Audit Committee and its subsequent investigation into the matter. Lufax later revealed a series of transactions from May 2023 to June 2024 led to an overstatement of both assets and liabilities on its balance sheet.
Allegations of Misstated Financials
The core of the lawsuit, filed by firms including Berger Montague PC and Glancy Prongay Wolke & Rotter LLP, centers on Lufax's alleged misrepresentation of its financial health. For years, the company assured investors its financial statements were accurate and internal controls were effective.
However, the January 27, 2025 announcement contradicted these assurances. Lufax revealed that PwC had been orally notified of its removal on January 16, 2025. PwC's disagreement stemmed from concerns about related-party transactions that it believed required an independent investigation. The auditor's refusal to consent to the use of its prior audit opinions in future filings further damaged investor confidence. In February 2025, Lufax confirmed the unreliability of its 2022 and 2023 reports, later issuing restated figures showing lower net profits.
The stock's decline reflects the market's reassessment of Lufax's corporate governance and financial transparency. The legal proceedings will now scrutinize the extent of the alleged accounting irregularities and their impact on shareholders. Investors who purchased Lufax securities during the specified period are now being called to join the class action.
This legal battle puts Lufax's internal controls and past financial reporting under a microscope, with the May 2026 deadline looming for investors to take a leading role. The outcome will be a key test of accountability for the Shanghai-based financial services firm.
This article is for informational purposes only and does not constitute investment advice.
