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SEC Material — Supplement

Sample Letter to China-Based Companies

Sample Letter to China-Based Companies[1]

Recent events have highlighted the risks associated with investing in companies that are based in or that have the majority of their operations in the People’s Republic of China (China-based companies). The Division of Corporation Finance believes that more prominent, specific, and tailored disclosure about these risks, and companies’ use of the variable interest entity (VIE) structure specifically,[2] is warranted to provide investors with the information they need to make informed investment decisions and for companies to comply with their disclosure obligations under the federal securities laws. The Division previously provided its views regarding certain disclosure considerations for China-based companies,[3] and, in July 2021, Chair Gensler issued a Statement on Investor Protection Related to Recent Developments in China.[4] Among other things, the Chair’s statement noted that the People’s Republic of China (PRC or China) has provided new guidance to, and placed restrictions on, China-based companies raising capital outside of China.

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