U.S. Treasury Secretary Steven Mnuchin testifies with Jovita Carranza, Administrator of the U.S. Small Business Administration during the Honors of the First Chamber of Small Business and Entrepreneurship, on the implementation of Title I of the CARES Act on Capitol Hill on June 10, 2020 in Washington, DC to investigate.
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Trump administration officials have urged the president to ban Chinese companies that trade on U.S. exchanges and do not meet U.S. requirements until January 2022, Securities and Exchange Commission and Treasury officials said Thursday.
The remarks came after President Donald Trump included a group of advisers, including Treasury Secretary Steve Mnuchin and SEC President Jay Clayton, drafting a report with recommendations to protect U.S. investors from Chinese companies whose accounting documents have long been kept by U.S. regulators. .
It also comes amid growing pressure from Congress to shut down Chinese companies that use U.S. capital markets but do not comply with U.S. rules that U.S. competitors have.
“We are simply leveling the playing field, and keeping Chinese companies in the US to the same standards as everyone else,” an official from the Treasury told reporters in a briefing on the report.
The U.S. Senate passed unanimous legislation in May that could prevent some Chinese companies from listing their shares on U.S. exchanges unless they follow U.S. auditing and regulatory standards.
‘Important first step’
Democratic sen. Chris Van Hollen, who sponsored the bill, described the recommendations as “an important first step”, but said that “without the added teeth of our bill, this report only implements the requirements not necessary to protect every American investor.”
The administration’s recommendations, if implemented through an SEC regulatory process, would give Chinese companies already in the United States until January 1, 2022, to ensure that the U.S. Audit Office, known as the PCAOB, has access to them. counter documents.
They can also provide a “co-audit”, for example carried out by a US parent company of the China-based branch, tasked with controlling the Chinese company. However, companies that want to list for the first time in the United States must comply immediately, officials said.
A State Department official told Reuters that the administration plans to scrap a 2013 agreement between US and Chinese regulators to institute a process for the PCAOB to seek documents in cases of enforcement against Chinese auditors.
China said on Friday that the two countries had “good cooperation” in overseeing publicly listed companies.
“The current situation is that some US regulators are not fulfilling their obligations, and what they are doing is political manipulation – they are trying to force Chinese companies to withdraw from US markets,” Foreign Ministry spokesman Wang Wenbin said in a media briefing. .
China softened its tone in a subsequent statement, calling for a resolution through dialogue.
The PCAOB has long complained about China’s failure to make inquiries, and gave it too little insight into audits of Chinese companies trading on US exchanges.
The report also recommends seeking more disclosure by issuers and registered funds of the risk of investing in China, as well as mandating more due diligence by funds that track indices and issue guidance to investment advisers on fiduciary obligations to invest in China.
The moves come amid growing tensions between Washington and Beijing over China’s treatment of the coronavirus and its movements to restrict freedoms in Hong Kong, among other problems.
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