The Securities and Exchange Commission on Monday evening released new demands for greater disclosure from Chinese companies listing on U.S. stock exchanges.
Specifically, the SEC’s new guidance requires Chinese companies using the so-called variable interest entity (VIE) scheme to raise funds abroad to provide “clear and prominent” information about the companies’ structure and risks associated with such structure. The SEC also calls on Chinese companies to disclose additional legal, regulatory, operational and enforcement risks associated with being based in China or having their main operation in China.
The VIE is a legal structure that many Chinese tech giants have used for the past two decades to bypass China’s foreign investment restrictions on overseas listings.
The SEC’s new guidance for Chinese companies come at a time when both American and Chinese securities regulators are seeking to clamp down on Chinese VIEs in light of Chinese ride-sharing company DiDi’s delisting. DiDi, which was compelled to delist from the New York Stock Exchange, is also listed in the U.S. through a VIE.
Beijing is reportedly drawing up a negative list that will include Chinese startups in sensitive sectors that plan to go public in overseas stock exchanges through the VIE scheme. And the SEC recently has finalized amended rules that can force all Chinese companies to delist from American exchanges if they don't comply with U.S. auditing requirements.
Climate TRACE's data show emissions at the facility-level.Image: Climate TRACE