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Chinese companies listed in US must disclose risks of government interference – SEC official

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Commissioner Allison Lee Attends US Securities and Exchange Commission Public Meeting to Propose Change to Decades-Old Definition of “Accredited Investor” to Allow More Americans to Buy Company Stock private, in Washington, USA, on December 18, 2019. REUTERS / Erin Scott / File photo

WASHINGTON, July 26 (Reuters) – Chinese companies listed on US stock exchanges must disclose risks of Chinese government interference in their activities as part of their regular reporting obligations, a senior Securities and Exchange official said on Monday Commission.

Democratic Commissioner Allison Lee’s comments are the first from an SEC official since Chinese regulators launched a massive cyber investigation into ride-sharing giant Didi Global last week, just days after its listing of 4, $ 4 billion in New York, wiping out 25% of its share price. Read more

U.S. officials have cracked down on other Chinese companies listed in the U.S. and may require tutoring companies to become nonprofits, according to a Bloomberg report that hit industry stocks, including TAL Education Group (TAL.N) and Gaotu, listed in New York. Techedu Inc (GOTU.N). Read more

Some policymakers fear that Chinese companies will routinely flout US rules, which require state-owned companies to disclose to investors a range of potential risks to their companies.

“State-owned enterprises should disclose material risks which, for China-based issuers, can sometimes involve risks related to the regulatory environment and potential actions by the Chinese government,” said Lee, who has served as interim chief of the SEC from late January to mid-April. , Reuters told Reuters in an interview.

The Wall Street Journal reported that Didi had been warned by regulators to delay his initial public offering and address his cybersecurity. Didi said he had no knowledge of the investigation prior to his enrollment.

Lee declined to say whether the SEC has opened an investigation into Didi for potential breaches of disclosure.

“We must always ensure that investors are fully informed about material risks, such as the risks that we have seen recently related to China,” Lee said.

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

For the past decade, policymakers in Washington have focused on bringing Chinese companies listed in the United States into compliance with the rules of the United States Public Company Accounting Oversight Board. Last year, Congress passed a law that would exclude Chinese companies from U.S. stock exchanges unless they adhere to U.S. auditing standards. Read more

But regulators have generally not focused on Chinese companies’ disclosure issues. Some lawmakers are asking the SEC to devote more resources to the issue.

“US regulators need to ensure that US investors and workers are protected from the type of non-market behavior that leaves US investors burnt out,” Senator Bill Hagerty, who sits on the Senate Banking Committee, said in a statement. to Reuters.

“This includes complying with the auditing requirements of the Public Company Accounting Oversight Board, as well as investigating whether there has been sufficient disclosure about the serious potential investment risks associated with such a centrally controlled economy,” said Hagerty.

Additional reporting and writing by Michelle Price; Editing by Dan Grebler

Our standards: Thomson Reuters Trust Principles.

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2/ https://www.reuters.com/business/us-listed-chinese-companies-must-disclose-government-interference-risks-sec-2021-07-26/

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