The SEC says all publicly listed Chinese companies in the United States must disclose any government interference risks

A top US Securities and Exchange Commission official on Monday ordered all US-listed Chinese companies to disclose any risks the Chinese government interference may have on their businesses as part of their regular reporting obligations.

The comment is the first of its kind by a senior SEC official, Democratic commissioner Allison Lee, since Chinese regulators began a massive probe of ride-hailing company Didi Global last week. The probe was barely a few days after the company's $4.4 billion listing on the New York Stock Exchange, cutting off 25% of its share price.

The Wall Street Journal reported that US regulators had warned Didi about the decision to proceed with its initial public offering despite the probe on its cyber security. However, the company denied having any knowledge of the investigation prior to the IPO.

The SEC declined to officially comment on whether or not it opened a probe on Didi, but a spokesperson said that as a matter of policy, the commission conducts investigations on a confidential basis and will not acknowledge the existence or non-existence of any investigation until charges are filed.

"Public companies must disclose significant risks which, for China-based issuers, may sometimes involve risks related to the regulatory environment and potential actions by the Chinese government," Lee said.

US authorities and regulators have cracked down on many US-listed Chinese companies and may require edutech Chinese companies such as TAL Education Group and Gaotu Techedu, to become non-profits, according to Bloomberg report. Some lawmakers believe that some Chinese companies are deliberating flouting US rules which demands that these companies report to investors all possible risks that could affect their businesses.

"We should always be focused on ensuring investors are fully informed of material risks, such as the risks we've seen recently related to China," Lee added.

For years, US lawmakers have focused on getting US-listed Chinese companies to adhere to the U.S Public Company Accounting Oversight Board rules. In 2020, Congress passed a bill to remove Chinese companies from US stock exchanges if they failed to comply with the American auditing standards. Lawmakers have called on regulators to focus more on Chinese companies disclosures.

"US regulators must insure that American investors and workers are protected from the sort of non-market behavior that is leaving American investors scorched," said Senator Bill Hagerty, a member of the Senate Banking Committee. "This includes enforcing compliance with Public Company Accounting Oversight Board audit requirements."