The Senate on June 22, 2021, passed a bill to move up by one year the congressionally-mandated deadline to delist foreign companies traded on U.S. exchanges unless the PCAOB can inspect their auditors, a move that ratchets up pressure in a long-running dispute between China and U.S. audit regulators.
S. 2184, the Accelerating Holding Foreign Companies Accountable Act, is sponsored by Sen. John Kennedy, a Louisiana Republican. The measure passed by unanimous consent.
Today, the Chinese government denies PCAOB access to audits of U.S.-traded Chinese companies, resulting in ongoing violations of the Sarbanes-Oxley Act of 2002.
“When foreign companies flout America’s security laws, they put Americans’ retirement plans and savings at risk,” Kennedy said in a statement urging House passage of the bill. “China is bent on exploiting American investors, so we need more accountability for foreign companies using American capital, and we need it now.”
The Accelerating Holding Foreign Companies Accountable builds on the bipartisan Holding Foreign Companies Accountable Act (HFCA), also sponsored by Kennedy, which former President Donald Trump signed into law in December. The HFCA would delist U.S.-listed foreign companies whose auditor the PCAOB is unable to inspect for three consecutive years. Kennedy’s latest bill would shorten that deadline to two years.
The Holding Foreign Companies Accountable Act also requires the companies to establish they are not owned or controlled by a foreign government, among other disclosure requirements. The SEC in late March issued interim final rules and request for comment in Release No. 34-91364, Holding Foreign Companies Accountable Act Disclosure that address the disclosure portions of the law. (See SEC Starts to Implement Rules to Address Chinese Company Audit Inspections in the March 25, 2021, edition of Accounting & Compliance Alert.)
This article originally appeared in the June 24, 2021 edition of Accounting & Compliance Alert, available on Checkpoint.
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