Tuesday Sept 14, 2021
From SEC Gary Gensler op ed in the WSJ today
The Securities and Exchange Commission may need to prohibit trading in about 270 China-related companies by early 2024. The reason can be traced to the Enron and WorldCom accounting scandals.
Congress passed the Sarbanes-Oxley Act in 2002, mandating inspections of public companies’ auditors by the Public Company Accounting Oversight Board. More than 50 foreign jurisdictions allow the board to “audit the auditors.” Two do not: China and Hong Kong.
Congress acted last year to fill this gap by unanimously passing the Holding Foreign Companies Accountable Act. The law prohibits trading in an issuer’s stock if a foreign jurisdiction prevents our oversight board from inspecting the company’s audit firm for three consecutive years. The SEC has taken all the required steps to implement this law, and the oversight board is on track to finalize its relevant rulemaking before the end of the year. The three-year clock began ticking in 2021.
Now it’s up to Beijing to let the oversight board in so we can ensure the relevant audits are up to U.S. standards. Early next year I expect we will announce which companies, if any, used an auditor that didn’t open its workpapers to U.S. overseers. If these companies use an audit firm in a noncompliant jurisdiction for two more years consecutively, their shares will be prohibited from trading in our capital markets beginning in 2024.
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