Reform is a dish best served cold

For decades, some of the biggest Chinese names on US trading screens have operated under a lighter rulebook than their domestic peers, because regulators allowed them to. 

Drafted in the 1970s and generously reworked a decade later, the “foreign private issuer” regime offers overseas firms listed in the US carve-outs on disclosure, proxy voting and governance. Even AGMs are optional: Alibaba, JD.com and Baidu took six, seven and 16 years respectively to meet with shareholders, only doing so after listing in Hong Kong.

Lighter-touch rules were the price of winning the global IPO race. They delivered deal flow, fees and status—and a class of large PRC issuers embedded in US markets but operating under a thinner rulebook.

Policymakers paid lip service to oversight risks and disclosure gaps. The issuers are regulated in their home markets, they argued, fully aware most were incorporated in Cayman, headquartered in China and only traded in New York. Investor groups, academics and governance mavens shouted into a void.

Having banked the fees and liquidity, the US is now tightening the terms of stay. This comes as the political costs of hosting Chinese issuers have risen and the strategic benefits have faded. Still, the prevailing reform narrative casts the US as a victim of exploitation: not as the bad host who designed the house rules and let the party run for decades.

Pony Ma, meet EDGAR

The pivot led to a new law in December 2025 requiring directors and senior executives of foreign issuers to disclose their own share dealings. From 18 March 2026, the likes of Tencent’s Pony Ma and Baidu’s Robin Li will now have to follow their domestic counterparts and disclose trades on EDGAR within two business days. Previously, such information typically appeared in annual reports.

It is a narrow fix, but a more consequential recalibration of the foreign issuer regime is being weighed by the Securities and Exchange Commission (SEC). In June 2025 the agency published a concept release seeking comments on whether the eligibility criteria and regulatory treatment of foreign issuers should be revised.

According to its data, nearly one in three foreign issuers are now Chinese, incorporated in Cayman or the BVI and many trade almost exclusively in New York.

While reform is still at the “shall we change anything?” stage, core themes include whether there should be a shift from a formal test (“are you foreign?”) to a functional one (“where do you really trade?”) and whether there is meaningful regulatory oversight outside the US.

One idea being floated is a foreign-trading threshold that would capture PRC issuers with large US investor bases or shares that trade almost exclusively in the US. Another track is a possible expansion of mutual-recognition-style arrangements with “trusted” jurisdictions such as the UK, Israel, Canada and Australia.

Up to January 2026 more than 80 submissions had been filed, with a large number from legal and accounting firms and other entities working on behalf of foreign issuers, notably from Israel, Canada and Europe.

Among the professional groups, the CFA Institute reiterated that it had warned against foreign issuer carve-outs for decades. But its critique focused on issuer opportunism rather than regulatory design, with PRC issuers cast as transmitting “weak regulatory standards into the US capital markets’’. It is a familiar tone among other US investor groups, academics and commentators who responded.

Drifting away

That the reform comes against the backdrop of deteriorating US-China relations and the ongoing drift of China’s most significant tech firms toward Hong Kong suggests it is more about regulatory reprisal than correcting past failings. 

The deteriorating political climate for Chinese firms in the US has already prompted a tilt toward Hong Kong. Of the 286 China-based companies with New York listings identified by the US-China Economic and Security Review Commission in March 2025, all but four of the top 20 by market capitalisation have a dual-primary or secondary listing in Hong Kong. In all, around 11% had a second listing there.

Hong Kong is an attractive fallback for Chinese issuers uneasy about the durability of US listings and has been easing and adjusting its listing standards in stages to draw PRC issuers back from New York, pitching the shift not as regulatory leniency but as a “homecoming”.

E-commerce platform Pinduoduo remains the most notable holdout. Despite recurring reports and market chatter about a Hong Kong listing, no such move has materialized. Full Truck Alliance, Vipshop Holdings and TAL Education Group have similarly flirted with secondary listings without executing them.

Hong Kong Exchanges and Clearing (HKEX) meanwhile points to a discernible shift of trading activity and share ownership away from US-listed ADRs and towards ordinary shares in Hong Kong.

Nasdaq tightens the gates 

The foreign issuer reform is moving in parallel with proposed changes at Nasdaq which would make it harder for smaller PRC issuers—viewed as higher regulatory risk—to tap US capital markets.

A notable feature of PRC listings in New York since 2023, when China’s securities regulator tightened its grip on the IPO pipeline, is that issuers coming to market are lesser-known names with smaller deal sizes.

Of the 49 China-based firms listed in New York between January 2024 and March 2025, only nine raised US$25m or more, while 10 issuers raised US$5m or less.

This has coincided with an uptick in pump and dump schemes, and in September 2025, the SEC singled out China firms as an area of focus for a cross-border task force within its enforcement division to target potential securities law violations. 

The same month, Nasdaq proposed raising entry requirements for new listings. All IPOs would require a minimum US$15m minimum public float, rising to US$25m for companies principally operating in the PRC, Hong Kong or Macau.

Hard talk, soft landing?

Taken together, the moves project a tougher regulatory line. But the US has been here before. Tough rhetoric on Chinese firms has not always been matched by follow-through—the most recent example being the Public Company Accounting Oversight Board saga of 2022, when US regulators promised regular audit inspection access in Hong Kong and the PRC but stopped short of securing it in full from China.

Radical reform of the foreign issuer regime seems unlikely, given the significant pushback by other overseas interests. But PRC issuers are expected to face more targeted scrutiny through a gradual tightening of eligibility tests, while preserving the core regime for firms genuinely based abroad.

The effect would be to narrow the pipeline without forcing disorderly exits—offering large, systemically important firms a workable “out” even as the overall regulatory environment grows less welcoming.

The worst outcome is a loss of foreign issuer status that forces a choice between a costly and legally fraught shift to domestic-style compliance or a de facto retreat from New York altogether. Some may not relish operating under heightened levels of scrutiny.

Being treated as a domestic issuer in the US would mean duplicating compliance across regimes, with decision-making compressed into a much tighter disclosure cycle: form 8-Ks within four business days for a wide range of events, Reg FD constraints on how management can speak to investors, quarterly reporting, near-real-time insider filings.

It could also place Chinese companies in a more continuous and intrusive regulatory relationship with the SEC. For boards already navigating PRC data, security and political constraints, adding another layer of intrusive US process may be seen as a strategic risk.

The proxy regime meanwhile opens the door to contested votes, activist campaigns and litigation around disclosures and governance. Shareholder meeting requirements and executive pay disclosure subject boards and management to a level of scrutiny—and public contestation—that may sit uneasily with how many Chinese firms are governed at home. It would amount to a different governance culture, testing firms’ tolerance for activist pressure and public dissent.

Whatever the outcome, the direction of travel is clear. The legal status of Chinese ADRs is becoming less predictable, the compliance burden more fluid and the cast is drifting toward another stage. The danger is not a sudden rupture, but a slow administrative squeeze—decoupling by stealth, presented as investor protection by regulators who built the system, tolerated its distortions for years and now disown it.

Copyright: Ninepin Ltd, 2026