RIYADH: China plans to ban companies from going public on foreign stock markets through entities with different interests. It will close a loophole that the country’s technology industry has long used to raise capital from foreign investors, according to Bloomberg. People familiar with the matter, who asked not to be identified while discussing private information, said the ban, aimed in part at addressing concerns about data security, is among the changes included in a new draft of China’s overseas listing rules that may be finalized as soon as this month. Companies using what is called the VIE (variable interest entity) structure would still be allowed to pursue initial public offerings in Hong Kong, subject to regulatory approval, the sources said. VIE refers to a business structure in which an investor has a controlling interest despite not having a majority of voting rights. A business that is the primary beneficiary of a VIE must disclose the holdings of that entity as part of its consolidated balance sheet. China Securities Regulatory Commission said on its website on Wednesday that a media report about banning offshore listings of companies using the VIE structure was incorrect, without giving further details. Companies currently listed in the US and Hong Kong that use VIEs will need to make adjustments so that their ownership structures are more transparent in regulatory reviews, especially in sectors where foreign investment is prohibited, the sources added. The reform would mark one of Beijing’s biggest moves to crack down on offshore listings. Authorities have since moved quickly to halt the flow of companies seeking to go public in the US, shutting down a path that has generated billions of dollars for tech companies and their Wall Street backers. While a global ban on the VIE structure is not being contemplated, a halt to foreign listings and a further review of Hong Kong"s initial public offerings will mean the model will not be a viable way for many startups to tap into the capital markets. A person familiar with the matter said that some investment banks had already been advised by regulators to stop working on new deals involving VIEs. The demise of VIE would also threaten the lucrative business streak of Wall Street banks, which has helped nearly 300 Chinese companies raise around $82 billion through first-time share sales in the US over the past ten years. VIEs have been a constant source of concern for global investors due to their unstable legal position. Sina Corp. and its investment bankers led the way during an initial public offering in 2000, and the VIE framework has not been formally adopted by Beijing.