The US financial market regulator, the SEC, on Friday warned Chinese companies listed on Wall Street that they must meet their obligations to inform foreign investors, after several weeks of turmoil.
Since the beginning of July, the Chinese regulatory authorities have operated a brutal takeover of several of their companies listed abroad, accused of having taken liberties and sometimes of a lack of caution in the management of personal data. In a message released Friday, Securities and Exchange Commission (SEC) Chairman Gary Gensler said his staff would review documents already submitted by companies listed on Wall Street with “significant activities in China».
The president of the regulator also announces that he has asked his teams to verify that all Chinese companies listed on the New York market indeed provide investors with a series of information. Chinese companies must therefore clearly state that they are not directly offering shares in their companies, but a “expositionTo these groups, according to the SEC term.
With direct investment of foreign capital in the capital of these companies being prohibited by the Chinese government, the suitors resort to a complex dual mechanism, called VIE on the Chinese side and ADR (or ADS) on the American side, to enter Wall Street and raise capital. Concretely, the investors hold shares in a mirror company of the Chinese group concerned, the two entities having contractual links, but not capitalistic.
Gary Gensler also recalls that Chinese companies wishing to be listed on Wall Street must inform investors that “future decisions of the Chinese government could significantly affect financial performanceOf the company.
The SEC also asks Chinese groups to communicate the position of the Chinese authorities regarding their listing on a foreign market. Companies must therefore mention any reservations the regulator has regarding an IPO on Wall Street, and “the risk that the authorization will be refused or withdrawn». «We will continue to verify that all companies adhere to the most demanding legal standards in terms of complete and accurate information.», Assured the president of the SEC.
Since early July, a series of Chinese companies listed on Wall Street, primarily the “Chinese UberDidi Chuxing, were subjected to restrictions and investigations by Chinese authorities. According to several media, Didi would have notably ignored the opinion of the regulator, who had spoken out against its introduction to Wall Street. Investors reacted badly and these stocks saw their capitalization melt in a few days.