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

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.

U.S. 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. 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.

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. 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.

SEC official says U.S.-listed Chinese companies must disclose government interference risks, CNBC, Jul 27