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Hi Terence,      
Honestly, there is no definite answer to your questions. Although authority has implemented system in place with multiple layers of checks such as independent directors, whistle blowing policy, internal and external audits, etc. to ensure every bits of information are presented to investors accurately, however, separating a fact from opinion is a multi-billions dollar industry by itself. Even if you’ve robust system in place, the complication lies whether the management would abide to those standard checks and balances. A crook can still inflate sales invoices without sounding any alarm. Most S-Chip companies, especially newly set-up/IPO, are a major red flag and easy target to short-sellers like Glaucus, Muddy Water, etc. Again, a firm can be around for many years and then being caught for fraudulent activities. Our dear ‘Enron’ will be a perfect example. Tough to have any hard or fast rule, isn’t it?      
Fiction and rumours are usually circulated via word of mouth which may not be necessarily to be true all the time. I still remember a company we visited three years ago claimed to have a superior technology that can detects oil well easily (appear to be fictional). To date, the company has yet to strike any major oil wells. So track the behaviours than mere spoken words. It’s never too late to invest.      
Moreover, when facts are made up, it’s no longer a fact. That’s why we’ve warned IQ members to avoid Chinese-listed companies abroad (ie Singapore, Malaysia) because you would never know how figures are being manipulated.There are simply too many crooks out there in China. From my experience, Singaporean/Malaysian founded companies rarely manipulate the facts. In Hong Kong, I would prefer local to have founded and run the companies. For China companies listed in Hong Kong, I would prefer the founders to have their values and belief taught abroad. By reading past annual reports on the letters written to shareholders, it gave me a rough indication if the management is capable, candid and trustworthy. A letter written based on standard template every year is very different from a letter written by passionate and driven entrepreneurs. I aptly prefer the latter. Not only that, it is terribly hard to believe that a company that has robust business model and wide economic moat would need to make up its number. By going through the four quadrants of IQ, at the end of the analysis, you should come to a conclusion if a stock is worth a bet or suspicious in many instances. For Sino Grandness, its unfavourable Convertible Notes and a beverage brand (I have never heard of it before) is worrisome for me.       
Short-seller can be bias at times based on the incentives they are getting. By shorting the stock and releasing a report (which they think is factual), and should the market believes the company is a fraudulent company, short-seller would make a big bucks out of it when the share price tumbles. A guy from Value Investor Club of Joel Greenbatt must be laughing his way to the bank now. On the other hand, short-sellers got stuck when IndoFood intentionally made a mandatory cash offer at a premium to buyout China MinZhong amid the allegations. Moral of story is don’t mess with the big boys.       
In anyway, if a stock is going to cause me a sleepless night, I would avoid it. In this case, Sino Grandness is going to cause me a sleepless night. I will simply stay away. I believe our energy should be devoted on the finding the goods and skip the suspicious one (short-sellers shot them down) :)