In the last several years, the Division of Corporation Finance has been issuing guidance regarding the disclosure obligations of companies based in or with a majority of their operations in the People’s Republic of China (China-based Companies). The guidance addresses an array of disclosure issues, including those related to the variable interest entity structure, the reliability of financial reporting, the regulatory environment in China, and corporate governance matters. Recently, the Division noted, in the context of the Commission’s rules under the Holding Foreign Companies Accountable Act (HFCAA), that it is monitoring disclosures by certain China-based Companies and may provide additional guidance. As part of its filing review process, the Division also issues comments to China-based Companies to enhance their compliance with disclosure obligations under the federal securities laws. The Division continues to believe that companies should provide more prominent, specific, and tailored disclosures about China-specific matters so that investors have the material information they need to make informed investment and voting decisions.
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