US SEC Begins Rollout of Law Aimed at Delisting Chinese Firms: Reuters

March 25, 2021 1:24 am

Beijing (PingWest)—According to Reuters, the US securities regulator said on Wednesday that it has passed regulations made by Congress that if foreign companies do not comply with US auditing standards, they will be kicked out by the American stock exchange.

The Holding Foreign Companies Accountable Act, signed into law by then-President Donald Trump in December, aims to remove Chinese companies from US exchanges if they fail to comply with US auditing standards for three years in a row.

The SEC Wednesday amendments will require companies to prove to the regulator that they are not owned or controlled by an entity of a foreign government, and also require disclosures on audit arrangements and government influence, the SEC said.

The agency fast-tracked the rule through "interim final amendments," but is seeking public comments on a process for identifying foreign companies to which the legislation should apply. Determining which entities the measure should apply to may prove challenging, given many companies have complex structures with subsidiaries or shell units registered in other jurisdictions.

The legislation required the SEC to issue rules around how companies should submit documentation within 90 days of enactment.

It is still "actively assessing" how to roll out the rest of the law's requirements, including the identification process and trading prohibition requirements, the statement said.

As China-US relations worsen, New York-listed  Chinese companies are accelerating their shift to Hong Kong for secondary listings. Technology firms Baidu, NetEase, and JD have already made secondary listings on the Hong Kong Stock Exchange in 2020. Electric car manufacturers Nio, XPeng and Li Auto are also reportedly considering a second listing in Hong Kong.