U.S. financial regulatory update
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The US Securities and Exchange Commission said on Friday that Chinese companies must disclose more about their structure and connections with the Chinese government before going public in the US.
After the public offering of Chinese ride-hailing group Didi Chuxing sparked controversy, Gary Gensler, chairman of US corporate and market regulators, has asked staff to ensure that Chinese companies increase transparency.
Gensler said in a statement: “I have asked employees to seek certain disclosures from offshore issuers related to the Chinese operating company before their registration statement becomes effective.” statement.
He added: “I believe these changes will improve the overall quality of disclosure in registration statements of offshore issuers associated with Chinese operating companies.”
The SEC’s new rules were announced by Beijing earlier this month that it would Tighten restrictions Overseas listings include stricter regulations on the data held by these companies.
Beijing on Friday reiterated its intention to strengthen supervision of overseas listings. The Political Bureau of the CPC Central Committee Say It is determined to “improve” the regulatory framework.
Chinese Internet regulators specifically accused Didi, which raised $4 billion in funds from a New York listing a few days ago, of violating personal data laws and ordered its apps to be removed from the Chinese app store.
Beijing’s crackdown frightened American investors and caused the company’s stock price to fall by nearly 50% in recent weeks. However, they have risen slightly in the past week. According to reports, the company is considering privatizing again a few weeks after going public. It has risen 15% in the past two days.
This controversy raised the question of whether Didi fully explained to investors the regulatory risks it faces in China, especially the frequent contacts with Chinese regulators before listing in New York.
Several U.S. law firms have filed a class action lawsuit against the company on behalf of shareholders, and two members of the Senate Banking Committee have appealed to the SEC Survey company.
The SEC has not yet stated whether it is conducting or intends to conduct an investigation. However, the new rules announced on Friday will require companies to have a clearer understanding of how their products are structured. Many Chinese companies, including Didi, use offshore shell companies to sell their shares to avoid China’s restrictions on foreign listings.
Gensler said on Friday that such companies should clearly distinguish between the business of the shell company and the business of the Chinese operating company, as well as the exact financial relationship between the two.
“I worry that ordinary investors may not realize that they hold stocks in a shell company, rather than stocks in a Chinese operating company,” he said.
He added that companies should state whether they have received or denied permission from the Chinese authorities to list in the United States, including whether any initial approvals were subsequently revoked.
They must also state that if they do not allow the Accounting Oversight Committee of U.S. listed companies to inspect their accountants three years after listing, they may be delisted.