Washington DC: A United States accounting oversight board proposed a draft rule to advance the implementation of legislation to remove foreign firms, from the US stock exchange that did not comply with American accounting standards.
According to the South China Morning Post (SCMP), this has been done to expedite a Trump-era law that would force publicly traded Chinese companies to delist from American bourses in three years if they do not share their audits for review.
The rule change would provide a framework to determine whether local authorities inhibited its inspections of foreign accounting firms that audit US issuers, SCMP reported the statement issued by the Public Company Accounting Oversight Board (PCAOB).
“The rule addresses situations where overseas authorities have denied the PCAOB the access it needs to conduct its mandated oversight activities,” PCAOB chairman William Duhnke III said in a statement.
The PCAOB said over 200 accounting firms from about 40 foreign jurisdictions are currently subject to inspection because they audit US-listed companies.
Meanwhile, a group of Chinese law professors, including professors from Peking University Law School, Tsinghua University Law School and the Institute of Law at the Chinese Academy of Social Sciences, said this month that the law is “obviously aimed” at Chinese companies, and includes the “extremely unusual” requirement that companies disclose directors and executives who are members of the Chinese Communist Party.
This comes after the Securities and Exchange Commission (SEC), which regulates the US stock markets, amended the Holding Foreign Companies Accountable Act to remove from the US stock markets foreign firms that did not comply with local accounting standards.
“The SEC has adopted interim final amendments to implement congressionally mandated submission and disclosure requirements of the Holding Foreign Companies Accountable Act (HFCA Act),” the SEC said in a statement in March.
The amended rule comes as US-China relations have reached a new low over several disputes on issues concerning human rights and trade, among others.
The HFCA Act would allow the SEC to kick foreign companies off US stock exchanges if they did not comply with the country’s auditing standards. The law would also require alien firms to disclose any governmental affiliations.
Signed into law in December last year, the HFCA Act was primarily aimed at removing Chinese companies from US exchanges if they failed to comply with US auditing standards, Sputnik reported.
The law also requires firms to prove to the SEC they are not owned or controlled by an entity of a foreign government, and to name any board members with such links.