May 28, 2020
In covering the risks that investors face for investing in foreign markets such as China, I would like to know what the SEC will definitively do in the case of accusations of outright fraud, as we've witnessed with Luckin Coffee and now appears to be the case with GSX Techedu (ticker: GSX).
Will Chinese companies be held to the same accounting standards as US companies? Will penalties and delistings be enforced in the case of non-compiance? How transparent will investigations be and at what point in the process will they be announced to the public?
Although any company can engage in fraud and attempt to cover it up, we must minimize it via strict standards and fierce penalties with zero preference for affiliation. There needs to be a universal, generally accepted accounting standard for US-listed companies, audits by verified firms or agencies with zero financial incentives toward the company, and standardized enforcement expectations for all publicly listed companies, regardless of their geographical or governmental jurisdictions.
Without this, we are not only exposing American investors to unnecessary risks, but gifting Chinese companies financial advantages over tightly regulated US companies, as capital is siphoned oversees due to phony data.