STOCK MARKET SNAPSHOT FOR 03/12/2021
NASDAQ-Adv: 3,003 Dec: 1,675 NYSE-Adv: 3,084 Dec: 1,240 (Source: Nasdaq)
Chinese companies that list on U.S. stock exchanges must disclose whether they are owned or controlled by a government entity, and provide evidence of their auditing inspections, the Securities and Exchange Commission (SEC) said on Thursday.
The rule advances a process that could lead to more than 200 companies being kicked off U.S. exchanges and could make some Chinese companies less attractive to investors.
Unlike many countries, China has not allowed the SEC’s accounting body, the Public Company Accounting Oversight Board, to inspect its auditors, which in turn certify the accounts of Chinese companies listed in the United States.
U.S. regulators worry the lack of U.S. oversight is putting investors at risk.
The rule will also require enhanced disclosures from Chinese entities listing in the United States via a vehicle known as a variable interest entity (VIE).
While that structure allows Chinese companies in some sectors to circumvent domestic rules on listing overseas, U.S. regulators worry the structure creates risks for investors and may obscure information on their ultimate ownership.
Companies will have 15 days to dispute an SEC designation that they require enhanced disclosure .
The SEC has up to three years to order delisting of companies that do not comply with the rules.
Source: Reuters (Reporting by Katanga Johnson in Washington; Editing by Michelle Price and Cynthia Osterman)