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
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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To avoid market disruption, the group recommended currently listed firms be given until January 2022 to comply with the rules or face expulsion.
The working group also recommended enhancing disclosures by issuers and funds regarding investing in companies from so-called non-compliant jurisdictions, encouraging greater due diligence by funds that track indexes that contain companies from those countries and issuing new guidance to investment advisers with respect to their fiduciary obligations when investing in those countries.
Bloomberg, citing an unidentified Treasury official who spoke to reporters in Washington, reported the working group had not yet determined how to enforce the new guidelines.
Chinese laws have not allowed the PCAOB to review the audits of prominent mainland firms listed in the US, including tech giants Alibaba Group Holding and Baidu. Alibaba is the parent company of the South China Morning Post.
The working group’s recommendations come as relations increasingly deteriorate between Washington and Beijing on a variety of issues, including trade, national security and Hong Kong’s autonomy.
Against this backdrop, several Chinese companies have considered secondary listings closer to home in Hong Kong or pursuing so-called take-private deals.
58.com, a Chinese online classified advertisement site, agreed in June to be taken private by a consortium of investors led by Warburg Pincus and General Atlantic. The deal valued the company at US$8.7 billion.