December 18, 2020
Congress recently passed the Holding Foreign Companies Accountable Act, legislation that looks to even the playing field between domestic companies and Chinese firms listing here. As President Trump is expected to sign the bill into law and many index providers are removing some Chinese companies from benchmarks.
For advisors, one way to prepare for this scenario is with WisdomTree’s Emerging Markets Multi-Factor Model Portfolio.
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Sputnik International
Trump Signs Bill That Could See Chinese Firms Delisted From US Exchanges
President Donald Trump on Dec. 18 signed into law bipartisan legislation that forces foreign companies listed on American exchanges to observe U.S. accounting rules a move that could see Chinese companies delisted from U.S. exchanges.
The Holding Foreign Companies Accountable Act will require Chinese companies to comply with U.S. auditing and reporting standards or face exclusion from U.S. stock exchanges. The bill was passed unanimously in the House earlier this month and passed in the Senate by unanimous consent in May.
Under the law, foreign companies that fail to comply with the Public Company Accounting Oversight Board’s (PCAOB’s) audits for three consecutive years will be subject to delisting from U.S. exchanges. The rule also applies to companies whose shares are traded over the counter.
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Coffee fans may argue that a bad day with coffee is better than a good day without it, but Luckin Coffee is certainly putting that adage to the test for its investors. We began writing about the coffee company’s woes earlier this year, and things have definitely gotten worse.
On December 16, 2020, Luckin, a recent darling of the market, agreed to pay a $180 million penalty to settle accounting fraud charges brought by the SEC. In its complaint filed the same day, the SEC claimed the company “intentionally and materially overstated its reported revenue and materially understated its net loss,” resulting in a $400 million fraud. The SEC’s investigation into Luckin is ongoing and may be receiving help from both Chinese and Swiss regulatory authorities.
By Jaclyn Jaeger2020-12-17T19:44:00+00:00
China-based Luckin Coffee has agreed to a $180 million penalty as part of a settlement with the U.S. Securities and Exchange Commission to resolve charges related to the coffee chain’s inflated-sales scandal.
From at least April 2019 through January 2020, Luckin intentionally fabricated approximately $311 million in retail sales transactions “in an effort to falsely appear to achieve rapid growth and increased profitability and to meet the company’s earnings estimates,” according to the SEC’s complaint, filed Wednesday in the Southern District of New York.
Certain executive officers and senior managers at Luckin attempted to conceal the fraud by inflating the company’s expenses by more than $190 million, creating a fake operations database, and altering accounting and bank records to hide the misconduct from the company’s finance department and others, the complaint states.