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US steps up disclosure pressure on Chinese companies
3 December 2021, 08:24
Companies that used an auditor in a foreign jurisdiction will be required to confirm they are not ‘owned or controlled by a government entity’.
Chinese companies will have to disclose more information about audits and whether they are controlled by a government or else leave US stock markets, under a rule approved by American securities regulators.
The rule approved on Thursday by the US Securities and Exchange Commission (SEC) steps up a long-running stand-off between Washington and Beijing over how much information companies with US-traded shares must disclose.
Companies that used an auditor in a foreign jurisdiction will be required to confirm they are not “owned or controlled by a government entity” there, according to the SEC.
Companies also will be required to disclose additional information in annual reports.
Trading prohibitions can be imposed on some companies, the SEC said.
Other governments cooperate with US demands for more financial details from companies to prevent false reporting.
But Beijing, citing security concerns, refuses to allow the US Public Companies Accounting Oversight Board (PCAOB) to review the work of Chinese auditors.
Hundreds of Chinese companies have raised tens of billions of dollars in US financial markets, but their status is a matter of growing dispute with Beijing.
The latest rule applies to audit firms the PCAOB is “unable to inspect or investigate”, the SEC said, a group that would be mostly Chinese.
Separately, the US government earlier barred Americans from investing in the stocks, bonds and other securities of Chinese companies deemed to be linked to the ruling Communist Party’s efforts to upgrade its military technology.