Chinese companies listed in the US must disclose the potential for government interference or risk violating the law, top SEC official says

• US-listed Chinese companies must disclose potential risks of Chinese government intervention, SEC Commissioner Allison Lee told Reuters on Monday.
• Lee's comments come as scrutiny of Chinese IPOs build in the US.
• Prominent Chinese IPOs such as Didi, RLX Technologies, and Full Truck Alliance have plummeted.

US-listed Chinese companies must disclose potential risks of Chinese government intervention or could be violating the law, SEC Commissioner Allison Lee said on Monday.

"Public companies must disclose significant risks which, for China-based issuers, may sometimes involve risks related to the regulatory environment and potential actions by the Chinese government," Lee said in an interview with Reuters.

Lee's comments come as scrutiny of Chinese IPOs build in the US. The abrupt collapse of shares in ride-hailer Didi Chuxing has attracted attention from politicians and regulators on the accusation that the company did not properly disclose potential risks of an imminent cybersecurity investigation.

Sen. Marco Rubio, for instance, has said it was "reckless and irresponsible" to let an "unaccountable Chinese company" like Didi float shares on US markets.

"Even if the stock rebounds, American investors still have no insight into the company's financial strength because the Chinese Communist party blocks US regulators from reviewing the books," he told the Financial Times earlier in July.

Didi, which had previously sought a valuation of $70 billion, has seen its prospects dimmed by China's cyber probe. It is now worth less than $40 billion, though on Monday the stock seemed to have found a floor around $8.

"We should always be focused on ensuring investors are fully informed of material risks, such as the risks we've seen recently related to China," said Lee.

Other US-listed Chinese stocks have similarly been battered by China's growing regulatory crackdown. Prominent Chinese IPOs such as RLX Technologies and Full Truck Alliance have seen initial exuberance give way to rapid share-price declines.

It is still unclear whether the SEC, Congress, or some other regulatory body has or will open a formal investigation into disclosure issues surrounding Chinese listings in America.

Didi was trading at $7.99 as of 3:37 p.m. ET, down about 1% on the day.