U.S.-listed Chinese companies must disclose government interference risks -SEC official



(Corrects authorities to Chinese, not U.S., in the third paragraph)

By Katanga Johnson

WASHINGTON, July 26 (Reuters) - 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 TAL.N and Gaotu Techedu Inc GOTU.N .

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

Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.

All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.

Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.

We are using cookies to give you the best experience on our website. Read more or change your cookie settings.

Risk Warning: Your capital is at risk. Leveraged products may not be suitable for everyone. Please consider our Risk Disclosure.