Chinese companies make up 250 of the 2,800 listed on the NYSE. That’s 8.9%.
SEC Chief Warns ‘Clock Is Ticking’ on Delisting Chinese Stocks
Securities and Exchange Commission Chair Gary Gensler has a warning for hundreds of Chinese companies that have raised billions of dollars in U.S. markets: Submit to more scrutiny soon or get kicked out.
In a Tuesday interview, he pledged to strictly enforce a three-year deadline that requires Chinese firms to permit inspections of their financial audits. If businesses refuse, their shares could be delisted from the New York Stock Exchange and Nasdaq as soon as 2024.
“The path is clear,” Gensler said. “The clock is ticking.”
The tough stance would seem to squash the hopes of some on Wall Street that Gensler might drag his feet in implementing the mandate from Congress and give Beijing more time to strike a deal with Washington regulators that allows the gravy train of Chinese stock sales to continue. They’ve been lucrative for big banks, exchanges and asset managers.
In his comments, Gensler laid out how he plans to deal with a multitude of tricky investor protection issues involving China. The conflicts, which have festered for almost two decades, have come to the fore in recent months as the Chinese government reined in prominent companies that trade on American exchanges, causing massive drops in their share prices and rattling investors.
The actions prompted the SEC last month to suspend new initial public offerings of China-based companies until they more clearly detail the potential pitfalls that shareholders face. On Tuesday, Gensler said he expects the same level of transparency from every Chinese firm that sells stock in the U.S., including those that already trade in New York.
Investors need “full and fair” disclosure, Gensler said, adding that the agency was looking especially for information on “regulatory risks, the various political risks” that companies in China could encounter.
Those enhanced disclosures are likely to come by next year, Gensler said. He declined to say what consequences firms would face for not complying.
As for the IPO pause, Gensler signaled it would continue as long as companies disclosures aren’t adequate. It could last “three weeks or three months,” he said. “It is really up to the issuers” and their lawyers and accountants.