US SEC chief warns against investment in Chinese firms
New York: US Securities and Exchange Commission (US SEC) Chairman Jay Clayton on Wednesday warned investors in the US over investing in emerging market companies, especially China, as they may be riskier than they appear.
The statement comes as both large and small investors adjust portfolios to minimise costs from the Covid-19 pandemic.
In an interview to Fox Business, Clayton said: “Investors have long wanted access to emerging markets, and we don’t want to deny them that access, but the risks are different.”
He added that there are a number of risks in emerging markets that do not exist in US markets, including the investors’ ability to have recourse.
“The risks are different and hard to discern,” he said.
Clayton added that the SEC has been locked in a decade-long struggle with the Chinese government to inspect audits of US-listed Chinese companies. The regulator’s accounting oversight arm, the Public Company Accounting Oversight Board, is still unable to access those critical records, he noted.
The statement comes a day after he said that companies that have operations in emerging markets, and investors in those companies, often face greater risks and uncertainties than in more established markets.
“Issuers reporting with the SEC should clearly disclose these matters to investors. Similarly, funds investing in emerging markets should ensure that their material risk disclosures are adequate and in compliance with federal securities laws,” he had said on Tuesday.
He noted that investors and financial professionals should carefully consider the nature and quality of financial information, including financial reporting and audit requirements, when making or recommending investments. Issuers should ensure that relevant financial reporting matters are discussed with their independent auditors and, where applicable, audit committees, he added in his Tuesday statement.