SEC May Potentially Forbid Trading for 270 China-Related Companies by Early 2024
SEC Release | SEC Chairman, Gary Gensler Insights
On September 13th, 2021, SEC Chairman, Gary Gensler, stated that the SEC may need to forbid trading in approximately 270 China-related companies by early 2024. Leading factors for this relates to the accounting scandals from Enron and WorldCom.
The Wall Street Journal provided detailed insights from Mr. Gensler and the SEC regarding why they may have to go this route for China-related companies.
Vigilant has created 8 Key Points from the article that YOU should be aware of:
- Congress passed the Sarbanes-Oxley Act in 2002 to mandate inspections of public companies’ auditor by the Public Company Accounting Oversight Board, but China and Hong Kong do not allow the board to audit the auditors.
- Last year, Congress acted to close the gap by unanimously passing the Holding Foreign Companies Accountable Act which prohibits trading in an issuer’s stock.
- The SEC is on track to enforce the law, and the oversight board is on the final steps of finalizing the relevant rulemaking before the end of the year.
- There is an expectation for early next year to see which companies used an auditor that did not open its workpapers to US overseers.
- Shares will be prohibited from trading in our capital markets at the start of 2024 if these companies do not use an audit firm in a noncompliant jurisdiction for two more years consecutively.
- The Accelerating Holding Foreign Companies Accountable Act was passed by the Senate in June which would move the window to two years for China’s companies to obey by the rules, if they do not, then their shares will not be able to trade in the US.
- There is a pause on new offerings from both Chinese operating companies who list directly and their shell-company affiliates. The SEC is making it a priority that relevant risks must be clearly disclosed. Mr. Gensler believes that China-related companies are not providing enough information about the risks they face. There is a worry that some investors do not realize that the money they are putting in is going into a Cayman shell rather than a company operating in China.
- The overall focal point of this article concluded by emphasizing that the Congress, SEC, and Public Company Accounting Oversight Board are working diligently to protect investors, and the time is currently ticking on these companies to make things right.
To view the full Wall Street Journal release regarding SEC Chairman, Gary Gensler’s insights click the here!