Asian Tech Press -- U.S. Securities and Exchange Commission Chair Gary Gensler, warned on social media platform Twitter on Tuesday that investors may not be aware that they are actually buying shares in shell companies, rather than buying shares in Chinese companies directly.

Gensler said he has asked SEC personnel to stop processing applications from Chinese companies for IPOs in the United States through shell companies, also known as VIE structure.

He also said he expects Chinese companies to disclose more detailed information when they go public in the U.S. to protect U.S. investors.

Gensler said in a video message that some Chinese operating companies have registered with the SEC through shell companies and that when U.S. investors mistakenly think they are investing in a Chinese company, they may be investing in an entity registered in the Cayman Islands. He demanded that those companies should fully disclose the flow of funds between the Cayman Islands entities and China-based operating companies.

Chinese regulators have recently taken a number of measures, such as not allowing foreign companies to hold shares in Chinese companies in certain industries and not allowing Chinese companies to list directly overseas. Gensler noted that these measures have forced Chinese companies to register in places like the Cayman Islands through variable interest entities (VIEs) or to register in the U.S. stock market using a shell corporation.

The SEC has stopped processing registration applications for initial public offerings and other securities sales by Chinese companies in the United States until they disclose more information about the investment risks to shareholders.