SEC issues new disclosure rules for Chinese companies to list in New York
The US Securities and Exchange Commission (SEC) has issued new disclosure requirements to Chinese companies seeking to list in New York amid Beijing’s regulatory crackdown.
The SEC has started to give some Chinese companies detailed instructions about greater disclosure of their use of offshore vehicles, known as variable interest entities for IPOs, implications for investors, and the risk that Chinese authorities will interfere with company operations, reported Reuters.
Last month, the SEC has frozen registrations of Chinese companies for IPOs on US markets while it drafts new guidance for disclosing the risk.
The SEC has asked Chinese companies to explain their corporate structure that may affect investors and the value of their investment, including how and why the contractual arrangements may be less effective than direct ownership.
The US regulator also required the companies to disclose investors may never directly hold equity interests in the Chinese operating company and the risk of Chinese regulators intervening with company data security policies.
China has prevented companies from sharing the work of their auditors to the US regulators. The SEC has asked some Chinese companies for more details if they do not comply with the US accounting disclosure requirements.
The SEC’s moves come as Beijing has intensified its regulatory crackdown against sectors ranging from technology to tutoring.
Last month, the Chinese regulator banned the country’s largest ride-hailing app Didi Chuxing from onboarding new users, just days after its Wall Street debut in late June. The authorities also investigated the company allegedly violating user privacy.
Chinese securities watchdog had responded to the SEC’s plan for new disclosure requirements, saying the two sides should enhance communication on the supervision of China-related stocks.