CPA Praises Passage of ‘Holding Foreign Companies Accountable Act’

December 02, 2020

Legislation targets publicly traded companies that evade U.S. audit requirements

Washington. The Coalition for a Prosperous America (CPA) praised House passage of S.945, the Holding Foreign Companies Accountable Act. The bipartisan legislation, which passed the Senate in May, would ensure that foreign companies traded in America’s stock exchanges are subject to the same independent audit requirements as U.S. firms. Specifically, the legislation would require Chinese companies listed on U.S. exchanges to certify that they’re not under the control of a foreign government.

“This is a win for the integrity of America’s financial markets,” said CPA Chair Dan DiMicco. “For too long, state-owned Chinese firms have been able to raise capital in America’s financial markets. There’s absolutely no reason to allow the very companies that engage in surveillance, repression, and human rights violations to enjoy the same market treatment as completely transparent U.S. firms. This bill is a no-brainer, and will make it more difficult for Chinese companies to evade U.S. financial requirements.”

The bipartisan legislation is a response to China’s refusal to let inspectors from the Public Company Accounting Oversight Board (PCAOB) review audits of Chinese companies that trade on U.S. exchanges. The bill would require foreign companies to follow the same independent audit requirements as U.S. firms. Companies found not be in compliance with the new law could be delisted from U.S. markets.

The problem of opaque foreign companies has also prompted scrutiny from the U.S. Securities and Exchange Commission (SEC), which has been working on parallel regulatory action to delist Chinese and other foreign companies not in compliance with U.S. auditing rules.

While the new legislation demonstrates bipartisan commitment to ensuring the integrity of U.S. financial markets, CPA remains concerned with some provisions. The bill would give companies three years to become compliant. CPA sees this as allowing too much time for companies to continue raising capital through unethical practices.

"We’re pleased to see growing, bipartisan congressional concern about China’s predatory market behavior,” said Michael Stumo, CEO of the CPA. “However, we will continue to be vigilant, since the bill allows potentially fraudulent Chinese companies to keep taking advantage of unsuspecting investors in the near-term.”

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