[Asia Economy Reporter Kim Suhwan] The U.S. securities authorities have begun delivering strengthened disclosure regulations to Chinese companies seeking to list on the New York Stock Exchange.
Major foreign media reported on the 23rd (local time), citing sources, that some Chinese companies pursuing U.S. stock listings have already started receiving detailed guidelines from the U.S. Securities and Exchange Commission (SEC) requiring broader disclosures regarding Variable Interest Entities (VIEs).
VIEs are entities primarily established by Chinese information technology (IT) companies to circumvent foreign investment restrictions imposed by Chinese authorities, and are commonly used when listing on overseas stock exchanges.
According to the report, the SEC has requested Chinese companies to explain how structures like VIEs affect investors and investment value.
Additionally, the SEC is said to have prepared disclosure regulations concerning the risk of interference by Chinese regulatory authorities in companies' data security policies.
Furthermore, the SEC has inquired in more detail from companies that have failed to comply with accounting disclosure regulations under the Holding Foreign Companies Accountable Act (HFCAA).
The HFCAA, signed into law by President Donald Trump in December last year, stipulates that companies unable to prove they are not controlled by foreign governments or that fail to pass audits by the Public Company Accounting Oversight Board for three consecutive years cannot be listed in the U.S.
Meanwhile, SEC Chairman Gary Gensler warned on the 16th that U.S. investors know little about Chinese companies listed on U.S. exchanges and cautioned about the investment risks associated with Chinese companies.
Chairman Gensler also stated that he has directed a temporary halt on approvals for listings of paper companies frequently used by Chinese companies when listing on U.S. stock exchanges.
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