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The bill, called the “Foreign Companies Liability Act” (Foreign Companies Liability Act), will require Chinese companies to comply with US auditing and reporting standards, or they will be delisted from the exchange. The bill passed unanimously in the House of Representatives earlier this month and passed unanimously in the Senate in May.
The law stipulates that if a foreign company does not comply with the PCAOB audit for three consecutive years, it will be delisted from the US stock market. This rule also applies to unlisted stocks traded without a prescription (Over the Counter).
The move affects Chinese companies such as Alibaba Group Holdings (NYSE: Baba), Jingdong (Nasdaq: JD) and China Mobile (NYSE: CHL).
Companies that cannot be audited by the committee must also determine that they are not controlled or owned by foreign governments.
Currently, the CCP uses national security and privacy as an excuse to prevent foreign regulators, including the U.S. Securities and Exchange Commission (SEC) and the PCAOB, from inspecting full audit reports of listed companies. based in China and Hong Kong.
Members of both parties welcomed the signing of the bill, and California Democratic Rep. Brad Sherman described it as “passing the most important investor protection legislation in years.”
Sherman, a House co-sponsor of the bill, said in a statement: “The purpose is not to remove any company from the list, but to persuade China to allow the auditing and oversight that American investors need, as well as that US investors are investing. ” The audit and supervision required for US companies or companies in more than fifty foreign jurisdictions. “
Sen. Chris Van Hollen of the Massachusetts Democratic Party, a co-sponsor of the Senate bill, described the law as “the best way to protect American investors from fraudulent companies.”
Recently, Chinese companies have come under strict scrutiny for fraud. Last week, Luckin Coffee, a China-based start-up, agreed to pay a $ 180 million fine to the U.S. Securities and Exchange Commission (SEC) to reach a settlement. The SEC stated that Luckin inflated income and expenses “intentionally and substantially” in its 2019 financial report, and reported no net losses, although it did not acknowledge or deny these allegations, Luckin agreed to pay penalties.
Earlier this year, Luckin Coffee stated that an internal investigation found that its COO had falsely reported about $ 310 million in sales in 2019, prompting Nasdaq to delist the company.
According to the Wall Street Journal, more than a dozen Chinese companies listed in the United States were privatized this year. As Washington intensifies its review of Chinese companies, more Chinese companies will announce delisting plans.
Additionally, Trump issued an executive order last month prohibiting the United States from investing in dozens of companies linked to the Chinese military. The order will take effect in early January and will give US investors the divestment of the affected securities before November 2021.
English Epoch Times reporter Emel Akan contributed to this report.
Editor in charge: Ye Zi #
