In the News: Less IPO Risk Disclosures; Drone Export Controls; and Foreign Listings by Bubble Tea Makers

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Chinese Regulators Tell Lawyers to Curb China-Related Risk Disclosures in Listing Prospectuses, Hong Kong Follows Suit

On July 20, the China Securities Regulatory Commission (CSRC) met with lawyers from over 10 Chinese law firms and instructed them to tone down China-related risk disclosures in foreign IPO prospectuses. Regulators hinted that listings may not be approved if companies fail to comply.

Companies seeking to list on major exchanges are required to inform investors of various pertinent business risks using fairly boilerplate disclosures. For Chinese companies, these disclosures typically describe how changes in China's political, economic and social policies, as well as regulations and foreign policy are linked to various risks for the business. This latest move by China's top securities watchdog, first reported by Reuters, signifies greater scrutiny of overseas listings by Chinese companies, especially considering the implementation of the Trial Measures for the Administration of the Offshore Offering and Listing of Securities by Domestic Enterprises (境内企业境外发行证券和上市管理试行办法) which came into effect on March 31 and barred any comments in foreign listing documents that "misrepresent or disparage laws and policies, business environment and judicial situation" of China. The China-specific risk statements in prospectuses prepared after March 31 caught the attention of some senior leaders in Beijing, prompting the CSRC to reiterate its stance on the subject to dealmakers, a source quoted by Reuters said.