Duval Times

U.S. Senator Marco Rubio (R-FL) has called on the Securities and Exchange Commission (SEC) to demand enhanced disclosures from SHEIN, a China-based company, as a condition for approving its initial public offering (IPO). Rubio's concerns stem from SHEIN's collaboration with Chinese regulators, which raises doubts about the completeness and accuracy of its IPO filings.

In a letter addressed to SEC Commissioner Gary Gensler, Rubio emphasized the need for investors to have access to the truth about SHEIN. He stated, "Investors deserve to know the truth about SHEIN. As a China-based issuer, SHEIN is subject to enhanced disclosure requirements and review by the SEC." Rubio urged the SEC to require additional disclosures from SHEIN regarding its operations, ties to the People's Republic of China (PRC) and the Chinese Communist Party (CCP), and the risks associated with doing business in the PRC.

Rubio highlighted the fact that SHEIN presents itself as a "global" company, but its considerable ties to the PRC cannot be ignored. The company was founded in the PRC, its current CEO is a Chinese national, and it employs thousands of people in the country. Furthermore, SHEIN sources, manufactures, and ships most of its apparel from a network of factories in the PRC. These operations make SHEIN subject to the influence of the Chinese government and the CCP.

Recent news articles revealed that SHEIN approached the China Securities Regulatory Commission (CSRC) and the Cyberspace Administration of China (CAC) to seek approval for its IPO in the United States. Rubio expressed concern that SHEIN's collaboration with Chinese regulators raises doubts about the completeness and accuracy of its IPO filings. He pointed out that Chinese regulators have previously ordered Chinese companies to deceive U.S. authorities and investors about the risks of doing business in the PRC.

Rubio outlined the specific disclosures he believes SHEIN should make in its IPO filings. These include acknowledging the company's dependence on the Chinese government, the potential for changes in laws and regulations in the PRC, the adverse changes in China's economy, the protracted administrative and judicial proceedings in the PRC, the use of slave labor in the production of cotton in the Xinjiang Uyghur Autonomous Region, the risk of seizure or prohibition of SHEIN's merchandise by U.S. Customs and Border Protection for violating the Uyghur Forced Labor Prevention Act, the exploitation of de minimis entry to avoid customs duties and inspections, and the infringement of copyrights of competitors in the apparel industry.

Rubio concluded his letter by stating, "These disclosures are true and essential for anyone to fairly appraise the risk of investing in SHEIN." He urged the SEC to protect U.S. investors by blocking SHEIN's IPO if the company refuses to make these disclosures.

The SEC has yet to respond to Rubio's letter, but the senator's call for enhanced disclosures underscores the need for transparency and accountability in IPO filings, particularly for companies with close ties to the PRC. Investors deserve to know the truth about the risks associated with investing in SHEIN, and the SEC has a crucial role to play in ensuring that these disclosures are made.