May 28, 2020
Ladies and Gentlemen:
Recent history shows that the lack of accounting controls and effective oversight, and foreign governments that have little interest in policing their companies that list on U.S. securities exchanges, has resulted in significant harm to U.S. markets and, more importantly, U.S. investors. China, in particular, has allowed its companies to list in the U.S. without any serious oversight of accounting or other business practices and without any effective check on their ability to continue these practices going forward.
The recent collapse of Luckin Coffee (LK) is just the latest example of a Chinese company listing in the U.S. with fraudulent financial information. Unfortunately, Luckin will not be the last Chinese company to bilk U.S. investors.
Any discussion of continuing fraud by emerging market companies (in particular Chinese companies) should include GSX Techedu Inc. (GSX), whose business practices and questionable or fraudulent financial statements, should make it the poster-child for emerging market fraud.
Protection of investors and the integrity of our financial markets is the SEC's primary function. As evidenced by the continued listing of companies such as GSX, more aggressive action is needed by the SEC to stop the abuses being committed by Chinese and other emerging market companies listing their shares in the U.S.