Accounting war: SEC ratchets up US-China dispute by adding JD.com, Pinduoduo and 80 Chinese stocks to list liable under auditing oversight law
- The SEC added more than 80 US-traded Chinese companies to a list liable under the 2020 Holding Foreign Companies Accountable Act (HFCAA)
- Under the law, foreign companies can be delisted if they fail to comply with the auditing oversight of a US body for three consecutive years
The US and China have been at odds for two decades over the mandate that all companies that trade publicly in America grant access to audit work papers. Since Congress passed the law in 2020, the Public Company Accounting Oversight Board (PCAOB), which oversees auditors, and the SEC have been laying the groundwork for identifying companies that don’t comply.
Firms face removal if they shirk requirements for three straight years, meaning they could be kicked off the New York Stock Exchange and Nasdaq as soon as 2024.
Critics say Chinese companies enjoy the trading privileges of a market economy — including access to US stock exchanges — while receiving government support and operating in an opaque system. But regulators in Beijing argue that Chinese national security law prohibits them from turning over audit papers to US regulators.