China freezes more than 40 IPOs pending an investigation as regulatory screws tighten
- Two Chinese stock exchanges have frozen more than 40 planned IPOs, according to Reuters.
- The exchanges say the freeze is due to a pending investigation by China's securities regulator.
- The securities regulator also indicated it would pursue cooperation with the US on auditing supervision.
Two Chinese stock exchanges have frozen more than 40 planned IPOs as an investigation by China's securities regulator into middlemen is underway, according to a new report from Reuters.
The Shanghai and Shenzhen stock exchanges have reportedly halted over 40 combined IPOs in the last week, according to disclosures reviewed by Reuters. The companies run the gamut from gas-engine and circuit breaker manufacturers to medical tech and semiconductors.
The exchanges say the freeze is due to a pending investigation by China's securities regulator into four accounting and law firms that assist in the IPO process.
While the IPO halt seems to have begun days ago, on Monday China's State Council said it would escalate a crackdown on fraudulent accounting and auditing, blaming accounting firms for permitting forgery, according to another Reuters report. Likewise, over the weekend, the securities regulator said it would start demanding higher-quality IPO disclosures.
The renewed scrutiny of IPOs is just the latest front in China's stepped-up regulatory campaign against a variety of domestic industries from tutoring to big tech.
The securities regulator also indicated it would pursue cooperation with America on auditing supervision, according to Reuters.
In March, the Securities and Exchange Commission moved to implement a new law that would force US-listed foreign firms - in this case, largely Chinese ones - to disclose their audits to American regulators or risk delisting.
Later, in July, the SEC froze Chinese listings in America as it reviewed what disclosures should be made to protect investors. Scrutiny has focused on opaque structures called variable interest entities, often used to execute US-based Chinese IPOs.