The SEC has temporarily stopped processing Chinese IPO registrations and other security sales, while it determines a new set of guidelines for disclosing the risk of Beijing’s latest regulatory scrutiny to investors.
On Tuesday, SEC commissioner Allison Lee announced that any Chinese-based companies listing their securities on US exchanges are required to routinely report to investors any potential risks that may arise in the event that the Chinese government interferes in their business practices. As a result, the SEC has told Chinese companies looking to make a US public debut to not submit their registrations until the regulator receives precise guidance on how to disclose such risk, revealed Reuters, citing individuals familiar with the matter.
The latest SEC crackdown is part of a broader regulatory move against US-listed Chinese corporations, which have repeatedly refrained from complying with US auditing rules. In June, the SEC dismissed the chairman of the Public Company Accounting Oversight Board (PCAOB), which has failed to enforce adequate independent auditing of Chinese corporations listing on US exchanges.
According to Reuters, which cited data from Refinitiv, Chinese-based US listings have soared to a record $12.8 billion since the beginning of 2021, as numerous companies took advantage of surging stock market gains. However, the number of new listings slowed significantly in July, after regulators in China banned ride-hailing app Didi Global Inc from taking on new users shortly after its NYSE debut. The onslaught of regulatory crackdowns also took aim at private education and technology companies.
The S&P/BNY Mellon China Select ADR Index, which captures the value of depository receipts of various US-listed Chinese companies, has fallen by more than 10% compared to year-ago levels.
Information for this briefing was found via Reuters. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
