U.S. securities regulators announced the latest regulatory measures to enforce the law that listed companies in the U.S. are not controlled by foreign governments and that foreign companies that do not comply with U.S. auditing standards will be expelled from the U.S. stock exchange. The regulations specifically list provisions regarding whether Chinese companies listed in the U.S. are controlled by the Chinese Communist Party.
The U.S. Securities and Exchange Commission (SEC) on Wednesday (March 24) announced an interim final amendment to enforce the Foreign Company Accountability Act (HFCA) requirement that companies listed in the United States certify that they are not controlled or owned by a foreign government entity.
The SEC’s statement refers to the requirement that U.S. listed companies must state whether there are Chinese Communist Party officials on their boards of directors and state whether the company’s bylaws contain a Chinese Communist Party charter, and disclose in their annual reports the existence of any overseas arrangements and influence.
The SEC accelerated the announcement of the interim regulations because the Foreign Company Accountability Act requires that the rollout of the regulations must begin within 90 days of the bill being signed into law. The SEC is currently seeking public comment on the non-compliant company identification process.
The SEC said it is actively evaluating how to implement other requirements of the bill that are not subject to the 90-day deadline, including the identification process and the prohibited transaction requirement.
Former President Donald Trump signed the Foreign Company Accountability Act last December, designed to prevent companies that fail to comply with audit requirements for three consecutive years from being listed on the SEC. Republican Senator John Kennedy (D-Mass.) and Democratic Senator Chris Van Hollen (D-Md.) co-sponsored the bill. Senator Kennedy noted at the Time that the Chinese government had repeatedly failed to allow the U.S. Public Company Accounting Oversight Board (PCAOB) to audit companies registered in China and Hong Kong.
In a statement last Dec. 18, Sen. Kennedy said, “Communist China has been a bully on the U.S. securities exchange floor for years, and that stops today.”
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