US SEC: Warning on Chinese Equity Investment: VIE Information Disclosure
-List specific concerns-
September 21, 2021
US-listed Chinese companies:
SEC mentioned “the mechanism of a paper company that Chinese companies utilize when listing on the US”.
US Securities and Exchange Commission (SEC):
SEC warned investors considering buying US-listed Chinese stocks.
He mentioned “the risk of the Chinese government cracking down on VIE and the possibility of conflicts of interest.”
Warning to investors:
SEC staff
In a September 20 warning to investors,
Should be considered when considering a stock acquisition,
He pointed out specific concerns.
Mechanism of Chinese companies and paper companies:
This includes the structure of a paper company that Chinese companies utilize when listing on the US.
SEC Gensler Chairman:
More than 250 companies already listed will soon be required to meet VIE information disclosure standards.
It warns of this situation.
SEC will continue after July
In the rice market by Chinese companies
Many new listing approvals are pending.
-Important concerns-
SEC to strengthen information disclosure obligations of all Chinese companies listed on the US
SEC urges investors to review a company’s annual report.
-What are the important concerns?
In a financial report, “How do Chinese companies explain their relationship with paper companies?”
“What is the relationship between a US-listed paper company and a Chinese operating company?”
Risk of Chinese government cracking down on a paper company called Variable Interest Entities (VIE)
Risks of investing in China’s private education business
Potential conflict of interest between owner of Chinese operator and US-listed VIE investor
Bloomberg
https://www.bloomberg.co.jp/news/articles/2021-09-20/QZQW00T0AFB501
U.S. SEC warns investors of risks from certain Chinese business entities
WASHINGTON, Sept 20 (Reuters)
The U.S. Securities and Exchange Commission (SEC) on Monday
issued its latest warning to people looking to invest in Chinese companies listed in the United States.
In an alert to investors, the SEC
detailed the potential risks in putting money into U.S.-listed companies that have contracts with but no control over a Chinese entity, known as a variable interest entity (VIE).
It is the most recent move by the agency to address concerns that Chinese companies are flouting rules for accessing U.S. markets.
In July, the agency
said it will not allow Chinese companies to raise money in the United States unless they fully explain their legal structures and disclose the risk of Beijing interfering in their business.
Earlier this year, the agency began rolling out a new law, aimed at China, that would kick foreign companies off U.S. stock exchanges if they do not comply with U.S. auditing standards.
According to the SEC, these U.S.-listed companies
often own a subsidiary in China that was formed to enter into the contractual arrangements with the China-based VIE.
The contracts can include
powers of attorney,
equity pledge agreements,
and exclusive services or business cooperation agreements.Reuters