The Saudi Electricity Company sets new disclosure requirements for IPOs of Chinese companies

[ad_1]

WASHINGTON – US regulators will require additional disclosures from Chinese companies before they are allowed to sell shares in the United States, following new restrictions imposed by the Chinese government on companies that raise capital abroad.

The SEC’s new disclosure requirements will mostly focus on so-called variable interest entities, or VIEs, a form of shell company used to get around Chinese government restrictions on foreign ownership and listings on offshore exchanges. The entities, often based in offshore jurisdictions such as the Cayman Islands, allow US investors to gain exposure to Chinese companies through service agreements and other contracts with the operator.

Gary Gensler, chairman of the SEC, said US investors may not realize they are buying shares in shell companies rather than an operating company in China.

“In light of recent developments in China and the general risks…I have asked employees to seek certain disclosures from external issuers associated with the China-based operators before making their registration data effective,” Mr. Gensler said on Friday.

Big Chinese tech companies, including Alibaba Group Holding Ltd. and Tencent Holdings Ltd. , hundreds of billions of dollars in market value combined in July as concerns mounted about how the sector would perform under a barrage of regulatory pressure from Beijing.

.

[ad_2]