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Chinese IPOs must present more risks



(Reuters) – The US Securities and Exchange Commission will not allow Chinese companies to raise money in the US unless they fully explain their legal structures and reveal the risk of Beijing interfering in its operations, the agency said on Friday. and confirmed an exclusive report from Reuters.

In a statement, SEC Chairman Gary Gensler said he had also asked staff to "participate in targeted further reviews of applications for companies with significant China-based operations."

Developments underscore US policymakers' concerns that Chinese companies are systematically violating US rules that require public companies to disclose to investors a range of potential risks to their financial performance.

Chinese listings in the US have reached a record $ 1

2.8 billion so far this year, according to Refinitiv data, when companies swooped in to capitalize on the US stock market and reach daily record highs.

Deal flows slowed significantly a month after Chinese regulators banned riding giant Didi Global Inc. from registering new users just days after its blockbuster IPO. They followed up with attacks on technology and private training companies.

In an interview with Reuters earlier this week, SEC Commissioner Allison Lee said that Chinese companies listed on US stock exchanges must disclose to investors the risks of the Chinese government interfering in their companies as part of their regular reporting obligations.

On Friday, Reuters reported that the agency did not process registrations for the issuance of Chinese corporate securities pending SEC guidance on how to identify the risks they face in China.

Subsequently, Gensler issued Friday's statement that, in light of Beijing's war, he had asked staff to seek further information from Chinese companies before making their registrations effective.

These should include investors facing "uncertainty about the government's future actions by China that could significantly affect the operating company's financial development" and th e feasibility of certain contractual arrangements.

Chinese issuers must also disclose whether they were denied permission by Chinese authorities to

In addition, Chinese companies should disclose when Chinese law requires them to list in the United States through an offshore shell company, which poses additional legal risks.

"I "These changes will improve the overall quality of disclosure of disclosure statements for offshore issuers affiliated with China-based operating companies," said Gensler.

has been frustrating Wall Street for years with its ovi to comply with US auditing standards and improve the governance of companies held close by the founders.

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