SEC statement on recent developments in China
FINANCIAL REPORTING INSIGHTS |
SEC Chair Gary Gensler recently released a Statement on Investor Protection Related to Recent Developments in China in which he discussed new restrictions placed by the government of the People’s Republic of China on China-based companies raising capital offshore, including through associated offshore shell companies. In light of this development, Gensler asked the SEC staff to:
- Require all China-based operating companies seeking to register securities with the SEC (either directly or through a shell company) to prominently and clearly disclose:
- That the Holding Foreign Companies Accountable Act, which requires that the Public Company Accounting Oversight Board (PCAOB) be permitted to inspect the issuer's public accounting firm within three years, may result in the delisting of the operating company in the future if the PCAOB is unable to inspect the firm; and
- Whether the operating company and the issuer, when applicable, received or were denied permission from Chinese authorities to list on U.S. exchanges; the risks that such approval could be denied or rescinded; and a duty to disclose if approval was rescinded;
- Seek certain disclosures from offshore issuers associated with China-based operating companies before their registration statements will be declared effective; and
- Engage in targeted additional reviews of filings for companies with significant China-based operations.