Exclusive-SEC provides Chinese companies with new requirements for US IPO disclosure by Reuters

© Reuters. File Photo: The US Securities and Exchange Commission (SEC) seal will be seen on May 12, 2021 at its headquarters in Washington, DC, USA.Reuters / Andrew Kelly / File Photo

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(Reuters)-The US Securities and Exchange Commission (SEC) has released a new disclosure to Chinese companies seeking to list on New York as part of a push to raise investor awareness of the risks involved, according to a document reviewed by Reuters. Started issuing requirements. And people who are familiar with the problem.

Some Chinese companies are beginning to receive detailed instructions from the SEC on more detailed disclosures regarding the use of offshore vehicles known as Variable Interest Entities (VIEs) for IPOs. Investor impact and risk of Chinese authorities interfering with the operation of the company.

Last month, SEC Chairman Gary Gensler called for a “suspension” of a Chinese company’s initial public offering (IPO) in the United States, calling for more transparency on these issues. China’s list in the US stopped after the SEC freeze. In the first seven months of 2020, such listings reached a record $ 12.8 billion as Chinese companies took advantage of the soaring US stock market.

“Implement how this type of corporate structure affects investors and the value of their investments, why contractual arrangements may be less effective than direct ownership, why, and the terms of the arrangement. Explain that the company can incur significant costs because of this, “one of the SEC letters Reuters saw said.

The SEC also requires Chinese companies to disclose that “investors can never directly hold a stake in a Chinese operating company,” the letter said. Many Chinese VIEs are incorporated into tax havens such as the Cayman Islands. Gensler says there are too many questions about how money flows through these entities.

“Please refrain from using terms such as” us “or” our “when describing VIE’s activities and functions,” the letter said.

A SEC spokesperson did not immediately respond to a request for comment.

Sources say the SEC also provides disclosure requirements regarding the risks of Chinese regulators intervening in corporate data security policies. Last month, a few days after Didi Global Inc’s blockbuster IPO, Chinese regulators banned carpooling giants from registering new users. This move was followed by crackdowns on tech and private education companies.

The SEC has also requested some companies to provide more information on non-compliance with the US Holding Foreign Corporate Liability Act regarding accounting disclosures to regulatory agencies. China has traditionally prevented companies from sharing the work of auditors with the US Public Company Accounting Oversight Board. Last month, the SEC dismissed its chairman of the board, but failed to promote an independent audit of US-listed Chinese companies.

The SEC’s move is to comply with U.S. auditing standards and is reluctant to improve corporate governance held closely by its founders U.S. regulators on Chinese companies that have frustrated Wall Street for many years Represents the latest remedy by.

The SEC is also under pressure to finalize the delisting rules for Chinese companies that do not comply with US audit requirements.

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Exclusive-SEC provides Chinese companies with new requirements for US IPO disclosure by Reuters

Source link Exclusive-SEC provides Chinese companies with new requirements for US IPO disclosure by Reuters

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