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The Chinese reverse merger companies (RMCs) reassessed: promising but challenging?
journal contributionposted on 2023-06-08, 15:13 authored by Qingxiu BuQingxiu Bu
A reverse merger is perceived to be a quicker and less expensive method of going public than a traditional underwritten initial public offering, which many Chinese companies have used to gain access to United States (“U.S.”) capital markets. A string of fraud allegations involving U.S.-listed Chinese reverse merger companies (RMCs) has unearthed numerous regulatory loopholes, challenging the efficacy of the Securities and Exchange Commission’s (“SEC”) supervision. This surge of securities lawsuits has come to exemplify investor concerns with RMCs’ accounting, audits and controls. The focus should have been put on developing an effective cross-border audit oversight system to ensure integrity and investor protection. The ostensible sovereignty issue and China’s vague State Secrets Law have stifled hopes of reaching an agreement on the joint inspection between the two jurisdictions. The unreliability of the judicial remedies at the current stage protrudes the imminence for the SEC and the Exchanges to impose more stringent listing standards, which may be the only realistic measures that can be taken to restore the investors’ confidence.
JournalJournal of International Business and Law
PublisherHofstra University School of Law
Department affiliated with
- Law Publications
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