Regulating U.S.-listed Chinese companies
July 05, 2016 | BY
Katherine Jo &clp articlesThe SEC has long had trouble enforcing against PRC companies listed in the U.S., with investors criticizing unfamiliar business models and audit disclosure restrictions. The latest Alibaba probe, governmental cooperation and privatization trends all indicate a shifting landscape
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Alibaba Group Holding Limited, the largest Chinese e-commerce company, listed on the New York Stock Exchange (NYSE) in 2014, marking the largest initial public offering (IPO) in history. The company chose to list in New York instead of Hong Kong or Shanghai in part due to more flexible U.S. listing requirements and, by doing so, became subject to regulation by the Securities and Exchange Commission (SEC).
Alibaba recently disclosed that it is the subject of a probe by the SEC into its accounting practices. While Alibaba has indicated it is cooperating with the investigation, many U.S.-listed Chinese companies have not been as willing. There have been more than 100 cases of alleged fraud at U.S.-listed PRC firms, and investors have lost billions. The SEC has been largely ineffective at enforcing U.S. securities laws against these Chinese businesses.