New York: Chinese companies hope to sell their shares in the United States must start making more disclosures about their potential risks before US regulators will enable them to include their stock.
Commission Securities and Exchange announced Friday’s steps after Beijing said it would increase the supervision of Chinese companies registered abroad, including reviews of their cybersecurity.
SEC Chair Gary Gensler shows specifically to Chinese businesses that use the company’s shell to get around Chinese rules that prevent foreign ownership for their industry.
Under this agreement, Chinese business forms a shell company in the Cayman Islands or elsewhere.
Shell company then sold its shares to investors after a list in New York.
Shell companies do not have Chinese company ownership.
Instead, he has a service contract with it.
This setting is called a variable interest entity, or “Visit.” “I am worried that the average investor might not realize that they held stocks in shell skin companies rather than Chinese-based operating companies,” said Gensler.
Gensler said he asked the SEC staff to ensure such a company made several disclosures before the initial public offering.
Among them: they must make investors who are clearly buying Shell Company shares, not Chinese-based operating companies, and future actions by the Chinese government can significantly affect financial performance.
Gensler also said that all Chinese companies trying for the US IPO must reveal the risk of the approval of the Chinese authority to register in US exchanges can be canceled, among others.
Some of the large Chinese companies have seen their stock falling recently because Beijing has increased their data protection and security regulations.
Stocks registered in the US from Hailing Ride Didi Global companies, for example, have fallen since they started trading at the end of June.
They fell by almost 20% on the fourth day of their trade after the company was ordered to stop registering new users and remove the application from an online store when increasing security for customer information.