New Rules for Reverse Mergers

If you’re considering going public by reverse merger instead of an IPO, make sure you check out the latest announcement from the SEC. The new rules, approved by the SEC on November 9, 2011, are from ‘the three major US listing markets’ and ‘place higher restrictions and requirements on reverse-merger companies (RMCs) before they can become listed on those exchanges.’ The SEC notes that reverse merger efforts from foreign companies, ‘particularly those from China‘, will be impacted.

Among the reasons for the new rules, the SEC explains, is that: ‘RMCs have not typically been subjected to the enhanced scrutiny associated with an IPO. In some cases, regulators and auditors encounter problems trying to obtain reliable information from RMCs, particularly those based overseas.’

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Source: Lexology

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