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China Regulator contradicts earlier reports of a 3-tier plan for US-listed companies

Written by Cláudio Afonso | | LinkedIn | Twitter

China’s Securities Regulator on Monday denied a report that said Beijing was working on a 3-tier plan to avoid the delisting of around 260 U.S.-listed Chinese companies. On Sunday, FT had reported Beijing was planning to sort the firms into three different groups considering the sensitivity of the data they hold.

In a statement released earlier today, the regulator said “Enterprises are required to comply with relevant national data information management laws, rules and regulatory requirements of the place of listing, regardless of whether they are listed domestically or overseas”.

The groups would consist of companies “with non-sensitive data; with sensitive data and with “secretive” data which would have to delist with the low risk category probably including retailers and restaurant chains”, the report says.

In 2020, Congress said that “it’s time for audit firms in all jurisdictions around the world to comply fully with Sarbanes-Oxley” approving a new rule to delist firms from the U.S. Stock Market if these don’t open their work papers to PCAOB inspection for three consecutive years.

The approval says, if governmental authorities don’t allow the auditors of foreign companies “to open their work papers to PCAOB inspection for three consecutive years”, the securities of companies audited by those firms could be “prohibited from trading in the U.S.”.

With the new rules, investors will be able to easily identify registrants whose auditing firms are located in a foreign jurisdiction that the PCAOB cannot completely inspect, U.S. SEC Chair Gary Gensler said in December 2021.


“The Commission and the PCAOB will continue to work together to ensure that the auditors of foreign companies accessing U.S. capital markets play by our rules. We hope foreign governments will working with the PCAOB, take action to make that possible,” he added.

Last May, YJ Fischer, the SEC office of international affairs director said, “Though there have been ongoing and productive discussions between US and Chinese authorities . . . significant issues remain and time is quickly running out

Earlier this month, Bloomberg reported U.S. Public Company Accounting Oversight Board (PCAOB) and the China Securities Regulatory Commission and the Ministry of Finance held calls with the negotiations “reaching a critical point”. Bloomberg added that the “redactions in auditors’ documents are a key barrier” to reaching a deal.

In early May, US SEC updated the Holding Foreign Companies Accountable Act (HFCAA) list adding NIO, XPeng while the PHEV maker LI Auto was added in late April. When both EV makers were added to the list, NIO answered by saying it will “continue to comply with applicable laws and regulations in both China and the United States” and also “strive to maintain its listing status on both the NYSE and the HKEX in compliance with applicable listing rules”.

Written by Cláudio Afonso | | LinkedIn | Twitter