Office Hours with Gary Gensler: The SEC, China & Offshore Shell Companies

In this episode of Office Hours with Gary Gensler, SEC Chair Gensler talks about China-based companies raising capital offshore, including through associated offshore shell companies. In certain sectors, like tech and the internet, the government of China doesn’t allow ownership investment in Chinese companies from people outside China. To get around that, China-based operating companies establish contractual relationships with shell companies in other countries. Those shell companies then raise capital on U.S. exchanges. When you think you’re investing in a Chinese company, you likely are investing in a shell company in the Caymans or another part of the world. At the SEC, we’ve put a pause, for now, on such listings of shell company issuers associated with China-based operating companies. SEC staff are also working to ensure that those companies provide disclosures to American investors so that they can make informed decisions about where to put their hard-earned money.