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Chinese companies face January 2022 comply-or-delist deadline under new US audit, disclosure recommendations

  • Chinese issuers would be required to provide access to audit papers under recommendations by the President’s Working Group on Financial Markets
  • Recommendations on foreign issuers come as US-China relations continue to sour with latest ban on Chinese-owned apps

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The Trump administration is recommending a January 2022 deadline for Chinese companies to comply with audit and disclosure requirements or face delisting after a string of high-profile scandals. Picture shows the US flag outside the New York Stock Exchange. Photo: AP
Chad Bray
Chinese companies could be forced to delist from United States bourses by January 2022 if they do not comply with a series of new rules recommended by a group of influential US regulators in a report released on Thursday.

The President’s Working Group on Financial Markets has recommended the Securities and Exchange Commission order US exchanges to adopt new rules for foreign issuers, including a requirement they provide access to their audit working papers to sell new shares or keep their existing listing in the US, it said. China was the only country mentioned by name among non-cooperating jurisdictions in the report.

The working group includes the heads of the US Treasury Department, the Federal Reserve, the SEC and the Commodity Futures Trading Commission.

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The recommendations follow a series of accounting scandals involving Chinese companies, including a US$300 million accounting fraud that led to Luckin Coffee being struck off from the Nasdaq in June. They could push more Chinese firms to consider listings in safe harbours closer to home in Hong Kong or Shanghai, more so with the latest banning of Chinese-owned apps.
“The recommendations outlined in the report will increase investor protection and level the playing field for all companies listed on US exchanges,” Treasury Secretary Steven Mnuchin, who is chairman of the working group, said in a statement. “The United States is the premier jurisdiction in the world for raising capital, and we will not compromise on the core principles that underpin investor confidence in our capital markets.”

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To avoid market disruption, the group recommended currently listed firms be given until January 2022 to comply with the rules or face expulsion.

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