SEC blocks Chicago Stock Exchange sale to China-based investors
|Date | 16-02-2018 - 10:12 AM||Article Type | Stock Markets||Region | United States|
The seal of the U.S. Securities and Exchange Commission
(Reuters) - U.S. regulators on Thursday rejected the sale of the Chicago Stock Exchange (CHX) to a group led by China-based investors, in part because they were unable to get enough information on some of the proposed buyers and the sources of their funds.
"Because of these concerns ... we are unable to find that CHX has met its burden of demonstrating that the proposed rule change is consistent with the Exchange Act," the U.S. Securities and Exchange Commission said in a statement. "We therefore disapprove the proposed rule change."
The proposed acquisition was approved in December 2016 by the Committee on Foreign Investment in the United States, which scrutinizes deals for potential national security concerns, but also needed SEC approval.
SEC staff initially approved the sale of the privately owned exchange in August, but SEC commissioners, led by Chairman Jay Clayton, an appointee of U.S. President Donald Trump, put the decision on hold in August for further review within minutes of the announcement.
The deal, which would have seen CHX sold for an undisclosed amount to a consortium led by Chongqing Casin Enterprise Group, drew harsh criticism from U.S. lawmakers who questioned the SEC's ability to regulate and monitor the foreign owners if approved.
CHX declined to comment.
In a filing posted on its website on Thursday evening, the SEC said it found at least four reasons why the deal did not meet laws governing the ownership of U.S. exchanges, which are stricter than usual due to the role they play in the economy.
Critically, the SEC said it was not satisfied as to the source of funds for the deal and who the ultimate consortium owners would be, raising worries the structure of the deal could allow new, unknown entities to assume stakes over time.
The SEC, which conducted its own extensive due diligence when reviewing the case, said that the CHX was not able to provide key information requested by the SEC regarding the potential owners "leaving various questions unanswered."
The CHX's inability to verify the ultimate potential beneficial owners would also make it difficult for the bourse to satisfy its ongoing compliance monitoring obligations, and would obstruct the SEC's own capacity to oversee the bourse said, it said.
In particular, the SEC said it was not satisfied it would have full access to the exchange's books and records if the deal were to go through.