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Regulation
TechTech War

US-listed Chinese companies must disclose to investors any risk of government interference

  • US policymakers worry that Chinese firms are systematically flouting US rules
  • A Top SEC official said on Monday that US-listed Chinese companies must disclose risks related to China’s regulatory environment

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Reuters

Chinese companies listed on US stock exchanges must disclose the risks of the Chinese government interfering in their businesses as part of their regular reporting obligations, a top US Securities and Exchange Commission (SEC) official said on Monday.

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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 last week, just days after its US$4.4 billion (28,5 billion yuan) New York listing, wiping 25 per cent off its share price.

Some policymakers worry Chinese firms are systematically flouting US 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 cybersecurity. Didi has said it had no knowledge of the investigation before its listing.

Lee declined to comment on whether the SEC had opened a probe of Didi for potential disclosure failings.

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“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.

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