Trump’s advisers call for delisting of U.S. listed Chinese companies that fail to meet auditing standards

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US Secretary of the Treasury Steven Mnuchin testifies with US Small Business Administration Trustee Jovita Carranza during Senate Small Business and Entrepreneurship hearings to review the implementation of Title I of the CARES Act on Capitol Hill on 10 June 2020 in Washington, DC.Kevin Dietsch | Getty Images

Trump administration officials have urged the president to deregister Chinese companies that trade on U.S. exchanges and fail to meet U.S. audit requirements by January 2022, Securities and Exchange Commission officials said Thursday and of the Treasury.The remarks came after President Donald Trump tasked a group of key advisers, including Treasury Secretary Steve Mnuchin and SEC Chairman Jay Clayton, to write a report with recommendations to protect U.S. investors from Chinese companies whose audit documents have long been kept away from US regulators.

It also comes amid mounting pressure from Congress to crack down on Chinese companies that profit from the US financial markets but fail to comply with US rules facing their US rivals.

“We are just leveling the playing field, keeping Chinese companies listed in the United States to the same standards as everyone else,” a Treasury official told reporters on a conference call about the report.

The US Senate unanimously passed a law in May that could prevent some Chinese companies from listing their shares on US stock exchanges unless they meet US auditing and regulatory standards.

“Important first step”

Democratic Senator Chris Van Hollen, who sponsored the bill, described the recommendations as “an important first step,” but said that “without the extra teeth of our bill, this report alone does not implement the necessary requirements to protect US investors on a daily basis ”.

The administration’s recommendations, if implemented through an SEC rule-making process, would give Chinese companies already listed in the United States until January 1, 2022, to ensure that the dog from US Audit Guard, known as PCAOB, has access to their audit documents.

They may also provide a “co-audit”, for example, performed by a US parent company of the China-based subsidiary responsible for auditing the Chinese company. However, companies seeking to register in the United States for the first time will need to comply immediately, officials said.

A State Department official told Reuters that the administration plans to scrap a 2013 agreement between U.S. and Chinese audit authorities in the near future to put in place a process for the PCAOB to search for documents in cases of execution against Chinese auditors.

China said on Friday that the two countries had “good cooperation” in monitoring listed companies.

“The current situation is that some US supervisors are not complying with their obligations, and what they are doing is political manipulation – they are trying to force Chinese companies to withdraw from US markets,” the holder said. speech of Foreign Ministry Wang Wenbin during a press briefing. .

China softened its tone in a subsequent statement, calling for a resolution through dialogue.

The PCAOB has long complained about China’s inability to grant requests, giving it little information about audits of Chinese companies that trade on U.S. exchanges.

The report also recommends requiring greater disclosure by issuers and registered funds of the risk of investing in China, as well as requiring more due diligence on the part of index-tracking funds and issuing advice. to investment advisers on fiduciary obligations related to investments in China.

The measures come amid mounting tensions between Washington and Beijing over China’s handling of the coronavirus and its measures to restrict freedoms in Hong Kong, among other issues.

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