Chinese companies listed in the US are required to disclose ownership, statistics: SEC | Financial Markets News

The law sets out a process that could result in over 200 companies being removed from the US.

Chinese companies that register on U.S. stocks must disclose whether they have or are controlled by a government agency, and provide proof of their scrutiny, the Securities and Exchange Commission (SEC) said Thursday.

The law promotes measures that can lead to the withdrawal of more than 200 companies from the US and could make some Chinese companies less attractive to investors.

The new law sets out a law passed by Congress in December 2020 that aims to ensure that foreign companies registered in the US, especially Chinese companies, comply with US law.

Unlike many other countries, China did not allow the SEC, the Public Company Accounting Oversight Board (PCAOB), to monitor its accountants, who verify the accounts of Chinese companies listed in the US.

Chinese authorities are reluctant to allow foreign rulers to run local accounting companies for national security.

U.S. authorities complain that a lack of oversight in the US puts investors at risk.

In essence, “the final law will allow investors to easily identify registrars whose accounting firms are in overseas areas that PCAOB cannot control. Also, foreign donors will need to disclose the amount of foreign government ownership to those organizations,” said the SEC chief executive. .

The law also requires additional information from Chinese organizations that have registered with the US through a variable entity (VIE) vehicle.

While the system allows Chinese companies in some areas to evade domestic regulations on foreign lists, U.S. authorities are concerned that its design poses a risk to investors and may hide information from owners.

Companies will have 15 days to challenge the name of the SEC seeking disclosure.

The SEC has three years to approve the removal of non-compliant companies.