On September 5, 2025, the SEC announced a Cross-Border Task Force targeting fraud risks in foreign-based companies accessing U.S. markets, with China explicitly named as a high-risk jurisdiction. The SEC’s Task Force represents another regulatory development targeting concerns about pervasive fraud involving China based issuers.
Background
Over the years U.S. capital markets regulators, including the SEC and Nasdaq, have been vocal about the risks in investing in China based companies due to poor disclosures and disclosure controls. In December 2020 the Holding Foreign Companies Accountable Act (“HFCA”) was adopted requiring foreign-owned issuers to certify that the PCAOB has been able to audit specified reports and inspect their audit firm within the last three years. If the PCAOB is unable to inspect the company’s public accounting firm for three consecutive years, the company’s securities are banned from trading on a national exchange. For my three part blog on the HFCA see HERE; HERE; and HERE.
Despite the HFCA, the SEC has remained concerned about the quality of disclosures, including specific risks, involved with China based companies. Back in July 2023, the SEC published a sample comment letter designed to inform the markets as to the type of information China based companies should include in their registration statement and periodic reports – see HERE. Even before that, in late 2022, the trading associated with China based companies effectively shut down the Nasdaq small cap IPO market for a time period – see HERE.
None of this has slowed down the China based IPO market. In fact, since 2020, there has been a sharp increase in the number of companies from China seeking to list in the U.S. with a record number seeking listing in 2024 and a continuation of that pace in 2025. Regulators continue to be concerned about the risks to investors and national security associated with China based companies seeking access to U.S. equity markets. For example, in May 2025, the financial officers of 23 states wrote a letter to SEC Chairman Atkins highlighting concerns with the listing of Chinese companies.
Regulators continue to attempt to address and correct the problem. In September 2025, Nasdaq proposed to adopt additional listing standards for China based entities including requiring a minimum firm commitment offering of $25 to qualify (see HERE). In October 2025, FINRA launched a investigation into broker-dealers involved China based small-cap IPOs (see HERE).
More recently, in December 2025, Nasdaq amended its discretionary authority to deny listings based on outside third party factors including: (i) the potential for one or more third parties to engage in misconduct impacting a company’s securities; (ii) the trading patterns of other companies with similar characteristics; (iii) advisors associated with companies (including auditors, underwriters, law firms, brokers, clearing firms, or other professional service providers); and (iv) the impact of foreign laws on the potential recourse available to U.S. regulators or investors in the event of misconduct (see HERE).
SEC Task Force Focus
As indicated, on September 5, 2025, the SEC announced a Cross-Border Task Force targeting fraud risks in foreign-based companies accessing U.S. markets, with China explicitly named as a high-risk jurisdiction. The Task Force coordinates across SEC divisions to pursue violations like pump-and-dump schemes and to scrutinize gatekeepers including auditors, underwriters, and broker-dealers. Priorities include jurisdictions with governmental influence limiting transparency, plus potential disclosure rule updates.
The Author
Laura Anthony, Esq.
Founding Partner
Anthony, Linder & Cacomanolis
A Corporate and Securities Law Firm
Securities attorney Laura Anthony and her experienced legal team provide ongoing corporate counsel to small and mid-size private companies, public companies as well as private companies going public on the Nasdaq, NYSE American or over-the-counter market, such as the OTCQB and OTCQX. For more than two decades Anthony, Linder & Cacomanolis, PLLC has served clients providing fast, personalized, cutting-edge legal service. The firm’s reputation and relationships provide invaluable resources to clients including introductions to investment bankers, broker-dealers, institutional investors and other strategic alliances. The firm’s focus includes, but is not limited to, compliance with the Securities Act of 1933 offer sale and registration requirements, including private placement transactions under Regulation D and Regulation S and PIPE Transactions, securities token offerings and initial coin offerings, Regulation A/A+ offerings, as well as registration statements on Forms S-1, S-3, S-8 and merger registrations on Form S-4; compliance with the Securities Exchange Act of 1934, including registration on Form 10, reporting on Forms 10-Q, 10-K and 8-K, and 14C Information and 14A Proxy Statements; all forms of going public transactions; mergers and acquisitions including both reverse mergers and forward mergers; applications to and compliance with the corporate governance requirements of securities exchanges including Nasdaq and NYSE American; general corporate; and general contract and business transactions. Ms. Anthony and her firm represent both target and acquiring companies in merger and acquisition transactions, including the preparation of transaction documents such as merger agreements, share exchange agreements, stock purchase agreements, asset purchase agreements and reorganization agreements. The ALC legal team assists Pubcos in complying with the requirements of federal and state securities laws and SROs such as FINRA for 15c2-11 applications, corporate name changes, reverse and forward splits and changes of domicile. Ms. Anthony is also the author of SecuritiesLawBlog.com, the small-cap and middle market’s top source for industry news, and the producer and host of LawCast.com, Corporate Finance in Focus. In addition to many other major metropolitan areas, the firm currently represents clients in New York, Los Angeles, Miami, Boca Raton, West Palm Beach, Atlanta, Phoenix, Scottsdale, Charlotte, Cincinnati, Cleveland, Washington, D.C., Denver, Tampa, Detroit and Dallas.
Ms. Anthony is a member of various professional organizations including the Crowdfunding Professional Association (CfPA), Palm Beach County Bar Association, the Florida Bar Association, the American Bar Association and the ABA committees on Federal Securities Regulations and Private Equity and Venture Capital. She is a supporter of several community charities including the American Red Cross for Palm Beach and Martin Counties, Susan Komen Foundation, Opportunity, Inc., New Hope Charities, the Society of the Four Arts, the Norton Museum of Art, Palm Beach County Zoo Society, the Kravis Center for the Performing Arts and several others.
Ms. Anthony is an honors graduate from Florida State University College of Law and has been practicing law since 1993.
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