The U.S. Securities and Exchange Commission plans to evaluate possible modifications which would impose stricter disclosure requirements on foreign companies that only list on U.S. exchanges. The SEC faces pressure from Republican Commissioner Mark Uyeda to initiate public discussions about foreign firm disclosure rules that he believes create an unfair advantage for Chinese and other overseas companies.
The current regulations allow overseas-based companies with foreign ownership and management to obtain foreign private issuer status. The foreign private issuer status allows these companies to avoid quarterly financial reporting and certain corporate governance requirements that domestic firms must follow on the same exchanges. Uyeda made this argument during the previous year to demonstrate how the current system produces an unbalanced competitive environment.
The 2024 congressional study which Uyeda referenced showed that 90% of the 265 Chinese companies listed in the U.S. market do not have listings on any foreign exchange which reveals a potential regulatory gap. Uyeda proposes that the SEC should evaluate the eligibility criteria for foreign private issuer status by requiring companies to list on another foreign exchange.
The commission will hold a meeting at 1 p.m. on Wednesday as it deals with increasing pressure regarding foreign firm reporting requirements during heightened geopolitical tensions and ongoing trade disputes with China.
The SEC maintains secrecy about its proposed rule modifications and the extent of its review process. Uyeda’s advocacy demonstrates the ongoing debate about U.S.-listed foreign firms maintaining less stringent disclosure requirements while competing for the same investor base.
During his Harvard presentation last year Uyeda emphasized the necessity of transparency because Chinese and other foreign companies expand their U.S. market presence without facing the same reporting requirements as domestic firms. The SEC’s decision will determine how global firms can access U.S. capital markets.
