SEC asks Chinese companies for new requirements for US IPOs

Reuters.-The United States Securities and Exchange Commission (SEC) began issuing new transparency requirements for Chinese companies seeking to go public in New York, as part of a plan to raise investor awareness of the risks involved A document was reviewed. Reuters and people familiar with the matter.

Some Chinese companies have begun to receive detailed information from the SEC about increased transparency in the use of convertible interest entities (VIEs) for IPOs, the implications for investors, and the risk of Chinese authorities interfering with business operations.

Last month, SEC Chairman Gary Gensler called for a “pause” and more transparency in US IPOs of Chinese companies.

IPOs of Chinese companies in the United States stalled after the SEC’s call. The IPO reached a record high of $12.8 billion in the first seven months of 2020.

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“Please describe how this type of corporate structure can affect investors and the value of their investments, including how and why contractual arrangements may be less effective than direct ownership, and how the company may need to enforce the terms of the agreements.” may incur substantial costs.” According to a letter from the SEC seen by Reuters.

Sugar VIE is included in tax havens such as the Cayman Islands. There are a lot of questions about how money flows through these entities, Gensler said.

“The use of words such as ‘we’ or ‘our’ should be avoided when describing the activities or functions of the VIE,” the letter said.

An SEC spokesperson did not immediately respond to a request for comment.

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