New York Stock Exchange Trading Floor
Caproasia.com | The leading source of data, research, information & resource for financial professionals, institutional investors, professional investors and private investors (UHNWs, & HNWs). Covering capital markets, investments and private wealth in Asia. How do you invest $3 million to $300 million? How do you manage $20 million to $3 billion of assets?

This site is for accredited investors, professional investors, investment managers and financial professionals only. You should have assets around $3 million to $300 million or managing $20 million to $3 billion.





United States SEC Increased Oversight of China Companies IPO on Stock Exchange, Disclosures & Ownership Relationships

4th August 2021 | Hong Kong

The United States Securities & Exchange Commission (SEC) has increased oversight of China companies IPO on United States Stock Exchange, requiring more disclosures and ownership relationships.  The statement released by United States SEC Chair Gary Gensler, follows the new guidance by China on restrictions of China-based companies raising capital offshore, including through associated offshore shell companies and structuring companies via Variable Interest Entities (VIEs).  For United States investors, certain Chinese sectors and companies are not allowed to have foreign ownership and cannot directly list on exchanges outside of China. (IPO ~ Initial Public Offering)

“ United States SEC Increased Oversight of China Companies IPO on Stock Exchange, Disclosures & Ownership Relationships “

 



2021 Data Release
2020 List of Private Banks in Hong Kong
2020 List of Private Banks in Singapore
2020 Top 10 Largest Family Office
2020 Top 10 Largest Multi-Family Offices
2020 Report: Hong Kong Private Banks & Asset Mgmt - $4.49 Trillion
2020 Report: Singapore Asset Mgmt - $3.48 Trillion AUM


The Full Statement on Investor Protection Related to Recent Developments in China

United States Securities Exchange Commission SEC Chair Gary Gensler Headshot
United States Securities & Exchange Commission (SEC) Chair Gary Gensler

United States Securities & Exchange Commission (SEC) Chair Gary Gensler on 30th July 2021:

Recently, the government of the People’s Republic of China provided new guidance to and placed restrictions on China-based companies raising capital offshore, including through associated offshore shell companies. These developments include government-led cybersecurity reviews of certain companies raising capital through offshore entities.

This is relevant to U.S. investors. In a number of sectors in China, companies are not allowed to have foreign ownership and cannot directly list on exchanges outside of China. To raise money on such exchanges, many China-based operating companies are structured as Variable Interest Entities (VIEs).

In such an arrangement, a China-based operating company typically establishes an offshore shell company in another jurisdiction, such as the Cayman Islands, to issue stock to public shareholders. That shell company enters into service and other contracts with the China-based operating company, then issues shares on a foreign exchange, like the New York Stock Exchange. While the shell company has no equity ownership in the China-based operating company, for accounting purposes the shell company is able to consolidate the operating company into its financial statements.

For U.S. investors, this arrangement creates “exposure” to the China-based operating company, though only through a series of service contracts and other contracts. To be clear, though, neither the investors in the shell company’s stock, nor the offshore shell company itself, has stock ownership in the China-based operating company. I worry that average investors may not realize that they hold stock in a shell company rather than a China-based operating company.

In light of the recent developments in China and the overall risks with the China-based VIE structure, I have asked staff to seek certain disclosures from offshore issuers associated with China-based operating companies before their registration statements will be declared effective. 

In particular, I have asked staff to ensure that these issuers prominently and clearly disclose:

  • That investors are not buying shares of a China-based operating company but instead are buying shares of a shell company issuer that maintains service agreements with the associated operating company. Thus, the business description of the issuer should clearly distinguish the description of the shell company’s management services from the description of the China-based operating company;
  • That the China-based operating company, the shell company issuer, and investors face uncertainty about future actions by the government of China that could significantly affect the operating company’s financial performance and the enforceability of the contractual arrangements; and
  • Detailed financial information, including quantitative metrics, so that investors can understand the financial relationship between the VIE and the issuer.

Additionally, for all China-based operating companies seeking to register securities with the SEC, either directly or through a shell company, I have asked staff to ensure that these issuers prominently and clearly disclose:

  • 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; and
  • 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.

In addition to this specific guidance, we will continue to hold all companies to the securities laws’ high standards for complete and accurate disclosure.

Further, I also have asked staff to engage in targeted additional reviews of filings for companies with significant China-based operations.

I believe these changes will enhance the overall quality of disclosure in registration statements of offshore issuers that have affiliations with China-based operating companies.   This work builds on the SEC’s Division of Corporation Finance’s previous guidance on disclosure considerations for companies based in or with significant operations in China.

I believe such disclosures are crucial to informed investment decision-making and are at the heart of the SEC’s mandate to protect investors in U.S. capital markets.



Caproasia.com | The leading financial website for financial professionals, professional investors and HNW investors. Covering capital markets, investments and private wealth in Asia. How do you invest $3 million to $300 million? How do you manage $20 million to $3 billion of assets? Quicklinks: Caproasia Access | TFC | Caproasia | Jobs

Join 14,000+ leading financial professionals and professional investors in Asia. Stay ahead of your peers & competition.
For press release, email to press@caproasia.com
For editorial, media kit, listing on TFC, events, seminars or research & data services, email to mail@caproasia.com


Previous articleCiti Private Bank Hires Credit Suisse Lillian Liao as China Global Market Manager, Lead Private Bankers to Focus on China Entrepreneurs
Next article$785 Billion Asset Manager Schroders Appoints Susan Soh as Head of Schroders APAC, Chris Durack Departs for Family
Caproasia.com covering capital markets, investments and private wealth in Asia. Our users manage, advise & invest $25 trillion assets in Asia