PCAOB Proposes Rule to Create Framework for HFCAA Determinations By
May 13, 2021
The Public Company Accounting Oversight Board has proposed a new rule provide a framework for its determinations under the Holding Foreign Companies Accountable Act, or the HFCAA.
The HFCAA calls for the Board to determine whether it is unable to inspect or investigate completely registered firms located in a foreign jurisdiction because of a position taken by an authority in that jurisdiction. The HFCAA, among other things, also mandates that after the Board makes such a determination, the Commission shall require covered issuers that retain firms subject to the Board’s determination to make certain disclosures in their annual reports and, eventually, if certain conditions persist, shall prohibit trading in those issuers’ securities.
The Strategic Competition Act of
2021,
1 approved by the Senate Foreign Relations
Committee on April 21, 2021, signals continued bipartisan consensus
to orient U.S. policy towards aggressive action to counter
China. Given the broad bipartisan support in
Washington to address China s malign activities, the bill will
likely pass the Senate and House of Representatives. This bill is a
useful barometer of congressional sentiment towards China and may
guide the Biden administration s future China-related actions.
The bill recognizes that U.S. ability to effectively compete with
China requires domestic support for competitive industries and
engagement with international partners to counter Chinese influence
in international institutions and on international standards. The
Chinese Tech Stocks Plunge on Tighter Access to U.S. Markets Chinese companies looking to list overseas are contending with pressure from U.S. and Chinese regulators, with it impossible to satisfy both.
May 07, 2021 | 08:00 AM EDT
Chinese tech stocks dropped suddenly on Friday, with Chinese regulators considering tightening rules on overseas listings. Those changes, if they come, could also make life tougher for existing international listings or newly listed growth companies.
The STAR 50 Index of next-gen stocks in Shanghai plunged 3.5% on Friday, having opened higher. There are now 269 STAR-listed companies but double that, 557 in fact, looking to join.
U.S. regulators are also maintaining their pressure on Chinese listings after a string of accounting scandals on American markets. The administration of President Biden seems set to continue a process set in motion under the Trump administration, despite opposition on Wall Street.
Chinese Companies Hold Record IPOs in US, Despite Tensions
News Analysis
Despite ongoing political tensions between the United States and China, the world’s two biggest economies are becoming increasingly intertwined financially, especially on the IPO front.
Even as the U.S. Congress begins to tighten the reins on China-based companies listed on U.S. stock exchanges, these companies continue to seek American capital. They have raised record amounts of equity capital through initial public offerings (IPOs) on U.S. exchanges this year.
There are certainly reasons for China-based companies to be hesitant to list here. Some China-based companies were recently delisted from U.S. stock exchanges, such as the three major Chinese state-owned telecom providers and the energy firm China National Offshore Oil Corp.
Baidu in the driverâs seat
Despite regulatory concerns, the Chinese tech company is a leader in AI and commercialising technology in cars and public transport.
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Along with a number of other Chinese tech names, Baidu shares have seen some pressure since March on regulatory concerns. Despite that, we believe the company has attractive long-term potential given some major advancements it has made in artificial intelligence and commercialising key technology.
US regulators have been pressuring Chinese companies on a mix of issues from adherence to US auditing practices to links to Chinese national defence. The latter led to the virtual delisting of China Mobile recently due to US national concerns. The former (audit concerns) is more relevant to Baidu following the Holding Foreign Companies Accountable Act on compliance with US auditing standards. Baidu is also feeling regulatory creep with the Chinese government expanding its oversight of larger tech companies.