- The
SEC is demanding new disclosures fromChinese companies seeking to list in New York. - The regulator wants to illuminate the risks tied to investing in Chinese companies' IPOs.
- The SEC has been ramping up pressure on US-listed Chinese companies for a while.
US market regulators have started sending out new disclosure demands to Chinese companies seeking to go public in New York, aimed at clarifying the risks of investing in those types of IPOs, Reuters first reported late on Monday.
The
Companies often use VIEs to passively hold financial assets, sometimes as a way to keep securitized assets off their balance sheets, or for research and development purposes. Investors in VIEs do not have voting rights, nor do they directly own stakes in the company. Instead, individual contracts outline the percentage of profits that they can receive, along with other conditions.
In contrast, investors who buy shares typically get a direct claim to a company's equity, a vote on major corporate decisions, and can buy and sell their stock at the prevailing market price.
Earlier this month, SEC chief
"So when you think you're investing in a Chinese company, you're more than likely actually investing in a shell company in the Caymans or another part of the world," Gensler said in a video message at the time.
In July, the SEC froze US listings of Chinese companies, announcing they would need to meet new disclosure requirements before going public. For example, they would have to outline the structure of the proposed IPO, and the potential for the Chinese government to meddle in its affairs.
The Chinese government has been cracking down on key sectors, including tech and internet companies, in recent months and has outlined a five-year plan that includes further tightening of regulations. The changes have hammered US-listed Chinese companies and caused major volatility in their share prices.