Tagged: HFCAA

The U.S. House of Representatives passed the HFCAA

The US House of Representatives unanimously passed the “Foreign Company Accountability Act” on December 2 local time. After a vote in the House of Representatives, it will be sent to the White House for the President to sign the legislation and take effect.

The Foreign Company Accountability Law is one step closer to its formal entry into force.

 

Reuters reported that although the law applies to companies in any country, it is aimed at companies such as Alibaba, technology company Pinduoduo and oil giant PetroChina Co Ltd. After the market, Pinduoduo, Weilai and other Chinese concept stocks appeared diving market. So, how big is the impact?

U.S. House of Representatives passes key bill

HFCAA

The U.S. House of Representatives voted to pass the “Foreign Company Accountability Act” on Wednesday, local time, which requires that foreign issuers who fail to meet the inspection requirements of the American Public Company Accounting Oversight Board (PCAOB) for accounting firms for three consecutive years are prohibited from trading in the United States. . The bill was passed in the US Senate in May this year.

The bill is generally supported by Republicans and Democrats, and the outside world has previously expected that the US House of Representatives will pass legislation this week.

The “Foreign Company Accountability Act” bill was jointly proposed by Republican Senator John N. Kennedy and Democratic Senator Chris Van Hollen (Chris Van Hollen). The bill was unanimously approved by the Senate in May, and after it is passed by the House of Representatives, it will be sent to President Donald Trump to sign the legislation and take effect. The White House also stated that it is expected that US President Donald Trump will sign a bill that may prevent some Chinese companies from listing on US exchanges unless they comply with US audit standards.

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In August of this year, the U.S. Department of the Treasury published on its official website the “Report on Protecting U.S. Investors from Major Risks of Chinese Companies” by the U.S. President’s Financial Markets Working Group, which aimed at the failure of the US Public Company Accounting Oversight Board (PCAOB), including China, to conduct inspections It is recommended that companies from these jurisdictions raise the listing threshold, strengthen information disclosure requirements, strengthen investment risk warnings, and require companies listed in the United States to meet the relevant requirements of PCAOB inspections by January 1, 2022.

It is worth noting that Chinese companies listed in the United States have certain restrictions on providing audit work papers to PCAOB. For many Chinese concept stocks, it is difficult to fully comply with the Foreign Company Accountability Law.

The “Regulations on Strengthening the Confidentiality and File Management Related to Overseas Securities Issuance and Listing” formulated in 2009 by the China Securities Regulatory Commission, the State Security Administration and the State Archives clearly stipulate that in addition to requiring the provision of relevant securities in the process of overseas securities issuance and listing Documents such as working papers formed in China by the securities companies and securities service institutions serving shall be kept in China.

Article 177 of the new “Securities Law” also clearly stipulates that overseas securities regulatory agencies shall not directly conduct investigations and evidence collection activities within the territory of the People’s Republic of China. Without the consent of the securities regulatory agency of the State Council and the relevant competent department of the State Council, no unit or individual may provide documents and materials related to securities business activities abroad without authorization.

China Securities Regulatory Commission previously responded

In May this year, the heads of relevant departments of the China Securities Regulatory Commission responded to reporters’ questions about the passage of the “Foreign Companies Accountability Act” by the U.S. Senate. He said that judging from the bill and the speeches of relevant persons in the U.S. Congress, some of the provisions of the bill are directly aimed at China , Instead of professional considerations based on securities supervision, we firmly oppose this practice of politicizing securities supervision.

 

The head of the relevant department of the Securities Regulatory Commission stated that the bill requires that foreign issuers that fail to meet the inspection requirements of the American Public Company Accounting Oversight Board (PCAOB) for accounting firms for three consecutive years are prohibited from trading in the US. In this regard, we believe that the bill completely ignores the fact that the Chinese and American regulators have been working hard to strengthen cooperation in audit supervision over a long period of time. China has always attached great importance to China-US capital market audit and supervision cooperation. In 2017, it assisted PCAOB in conducting a pilot inspection of a Chinese accounting firm. Since 2019, it has repeatedly proposed specific plans for joint inspections of accounting firms to PCAOB. We look forward to receiving a positive response from the U.S. regulatory agencies and call on both parties to speed up the joint inspection of relevant accounting firms through equal and friendly consultations and in accordance with the international practice of cross-border audit supervision cooperation.

The bill will damage the interests of both parties. It will not only hinder foreign companies from listing in the United States, but will also weaken the confidence of global investors in the U.S. capital market and its international status. High-quality listed companies are an important resource for competition in the capital markets of various countries. It is believed that international investors will make their own wise choices based on the needs of their best interests.

It is hoped that relevant parties in the United States will uphold professionalism, meet China halfway, and handle regulatory cooperation issues in accordance with the principles of marketization and rule of law. Promote China-US audit supervision cooperation with practical actions to promote the early consensus between the two parties and jointly protect the legitimate rights and interests of investors.

Related response from the Ministry of Foreign Affairs

At the regular press conference of the Ministry of Foreign Affairs held on December 2, a reporter asked: According to reports, the US House of Representatives may pass a bill restricting the listing of Chinese companies in the US this week. What’s your opinion?

Image source: Ministry of Foreign Affairs

Foreign Ministry spokesperson Hua Chunying replied:

I think the issue you mentioned just now shows once again that the United States has adopted a discriminatory policy against Chinese companies and is politically suppressing Chinese companies.

As for the specific issue you mentioned that the US House of Representatives will vote on the Foreign Company Accountability Act, you can ask the competent authority.

I can emphasize again in principle that in today’s highly globalized capital market, relevant parties can openly strengthen cross-border supervision and cooperation, and strengthen dialogue and cooperation on issues such as protecting the legitimate rights and interests of investors are the only solutions to the problem. right way.

We firmly oppose the politicization of securities supervision. We hope that the U.S. can provide a fair and just environment for foreign companies to invest and operate in the U.S., instead of trying to set up barriers.