US looking to delist China firms for not meeting audit rules

WASHINGTON • Trump administration officials have urged the President to delist Chinese companies that trade on US exchanges and fail to meet US auditing requirements by January 2022, Securities and Exchange Commission (SEC) and Treasury officials have said.

The remarks came after President Donald Trump tasked a group of key advisers, including Treasury Secretary Steve Mnuchin and SEC chairman Jay Clayton, with drafting a report with recommendations to protect US investors from Chinese companies whose audit documents have long been kept from United States regulators.

It also comes amid growing pressure from Congress to crack down on Chinese companies that avail themselves of US capital markets but do not comply with US rules faced by American rivals.

"We are simply levelling the playing field, holding Chinese firms listed in the US to the same standards as everyone else," a Treasury official told reporters in a briefing call about the report on Thursday.

The US Senate unanimously passed legislation in May that could prevent some Chinese companies from listing their shares on US exchanges unless they follow standards for US audits and regulations.

Democratic Senator 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 alone does not implement the requirements necessary to protect everyday American investors".

The administration's recommendations, if implemented via an SEC rule-making process, would give Chinese companies already listed in the US until Jan 1, 2022, to ensure the US auditing watchdog, known as the PCAOB, has access to their audit documents.

They can also provide a "co-audit", for example, performed by a US parent company of the China-based affiliate tasked with auditing the Chinese firm. However, companies seeking to list in the US for the first time will need to comply immediately, the officials said.

A State Department official told Reuters the administration plans soon to scrap a 2013 agreement between the American and Chinese auditing authorities to set up a process for the PCAOB to seek documents in enforcement cases against Chinese auditors.

China said yesterday that the two countries have "good cooperation" in monitoring publicly listed firms.

"The current situation is that some US monitoring authorities are failing to comply with their obligations, and what they are doing is political manipulation - they are trying to force Chinese companies to delist from US markets," foreign ministry spokesman Wang Wenbin told a media briefing.

LEVELLING THE PLAYING FIELD

We are simply levelling the playing field, holding Chinese firms listed in the US to the same standards as everyone else.

A U.S. TREASURY OFFICIAL, to reporters in a briefing call about the report on Thursday.

REUTERS

A version of this article appeared in the print edition of The Straits Times on August 08, 2020, with the headline 'US looking to delist China firms for not meeting audit rules'. Print Edition | Subscribe