On Wednesday evening, US SEC updated the Holding Foreign Companies Accountable Act (HFCAA) list adding NIO, XPeng and many other Chinese companies. According to the law approved in late 2020, the companies on the list used an auditor “whose working paper cannot be inspected or investigated completely by the PCAOB”. Previously, on April 22, also the Chinese automaker LI Auto was added to the HFCAA list.
Can these companies be delisted from the US Market?
Yes, but not likely to happen because these companies have 3 years from now to change the accounting firm they use. According to the HFCAA law, if a foreign company files its annual report through a public accounting firm that has not been subject to inspection for the PCAOB for three consecutive years beginning in 2021, the SEC can delist the company from the US Markets.
Which means, SEC would prohibit the shares or American depositary shares of the Company from being traded on a national securities exchange or in the over-the-counter trading market in the United States.
NIO has been actively exploring possible solutions to protect the interest of its stakeholders. On March 10, 2022, the Company completed a secondary listing of its Class A ordinary shares on the Main Board of the Hong Kong Stock Exchange (the “HKEX”) under the stock code “9866.” The Class A ordinary shares listed on the HKEX are fully fungible with the ADSs listed on the NYSE.
NIO will continue to comply with applicable laws and regulations in both China and the United States, and strive to maintain its listing status on both the NYSE and the HKEX in compliance with applicable listing rules.
Under the HFCAA, the PCAOB has the responsibility for determining that it is unable to inspect or investigate completely a registered public accounting firm or a branch or office of such a firm because of a position taken by an authority in a foreign jurisdiction. The Commission’s role at this stage of the process is solely to identify issuers that have used such PCAOB-identified public accounting firms to audit their financial statements, SEC says.
Until now, XPeng has still didn’t publicly answer to the matter.