US-listed Chinese firms must disclose govt interference risks

photo by Markus Spiske on unsplash

Chinese companies listed on U.S. stock exchanges must disclose the risks of the Chinese government interfering in their businesses as part of their regular reporting obligations, a top U.S. Securities and Exchange Commission official said on Monday.

Democratic commissioner Allison Lee’s comments are the first by an SEC official since  Chinese regulators launched a massive cyber probe of ride-hailing giant Didi Global last week, just days after its $4.4 billion New York listing, wiping 25% off its share price.

Chinese authorities have cracked down on other U.S.-listed Chinese companies and may require tutoring firms to become non-profits, according to a Bloomberg report that hit shares in the sector, including New York-listed TAL Education Group and Gaotu Techedu Inc.

Some policymakers worry Chinese firms are systematically flouting U.S. rules, which require public companies to disclose to investors a range of potential risks to their businesses.

“Public companies must disclose significant risks which, for China-based issuers, may sometimes involve risks related to the regulatory environment and potential actions by the Chinese government,” Lee, who served as acting head of the SEC from late January to mid-April, told Reuters in an interview.

The Wall Street Journal has reported that Didi had been warned by regulators to delay its initial public offering and to address its cyber security. Didi has said it had no knowledge of the investigation prior to its listing.

Lee declined to comment on whether the SEC had opened a probe of Didi for potential disclosure failings.

“We should always be focused on ensuring investors are fully informed of material risks, such as the risks we’ve seen recently related to China,” Lee said.

An SEC spokesperson said that as a matter of policy, the SEC conducts investigations on a confidential basis and does not acknowledge the existence or non-existence of any investigation unless or until charges are filed.

Over the past decade, Washington policymakers have focused on getting U.S.-listed Chinese companies to comply with U.S. Public Company Accounting Oversight Board rules. Last year Congress passed a law that would kick Chinese companies off U.S. exchanges unless they adhere to American auditing standards.

But regulators have not generally focused on Chinese company disclosure issues. Some lawmakers are calling for the SEC to devote more resources to the issue.

U.S. regulators must insure that American investors and workers are protected from the sort of non-market behavior that is leaving American investors scorched,” Senator Bill Hagerty, who sits on the Senate Banking Committee, said in a statement to Reuters.

“This includes enforcing compliance with Public Company Accounting Oversight Board audit requirements, as well as investigating whether there have been sufficient disclosures about the serious potential investment risks associated with such a centrally-controlled economy,” Hagerty said.

Reuters

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.