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Holding Foreign Companies Accountable Act

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Holding Foreign Companies Accountable Act
Great Seal of the United States
Long titleA bill to amend the Sarbanes-Oxley Act of 2002 to require certain issuers to disclose to the Securities and Exchange Commission information regarding foreign jurisdictions that prevent the Public Company Accounting Oversight Board from performing inspections under that Act, and for other purposes.
Announced inthe 116th United States Congress
Number of co-sponsors4
Legislative history

The Holding Foreign Companies Accountable Act is a bill in the United States Congress that would require companies publicly listed on stock exchanges in the United States to declare they are not owned or controlled by any foreign government.[1] It seeks to amend the Sarbanes–Oxley Act in requiring these companies to disclose to the United States Securities and Exchange Commission information on foreign jurisdictions that prevent the Public Company Accounting Oversight Board (PCAOB) from conducting inspections. Such companies will be banned from trading and delisted from exchanges if the PCAOB is not able to audit specified reports for three consecutive years.[2]

Background

In 2019, a similar bill titled the EQUITABLE Act was introduced by Senator Marco Rubio (R-FL) in the United States Senate over concerns certain foreign companies were non-compliant with oversight and audit rules on American stock exchanges. This was in response to the lack of compliance and transparency among Chinese companies listed on US exchanges, thereby increasing the risk of defrauding investors.[3]

The consideration of the Holding Foreign Companies Accountable Act in Congress coincided with the high-profile financial scandal involving Chinese coffee chain Luckin Coffee, which fired both its CEO and COO in May 2020 for accounting fraud concerning the intentional fabrication of around $310 million in sales in 2019. This subsequently resulted in Luckin's shares plunging by around 80%.[4] Luckin also received a delisting notice from the Nasdaq stock exchange on May 19, 2020.[5] On June 26, it was confirmed that Luckin would be delisted from the Nasdaq and Luckin's stock saw its last day of trading.[6]

Legislative history

On May 20, 2020, the bill passed the United States Senate by unanimous consent.[7]

References

  1. ^ Chris Matthews (20 May 2020). "Senate passes bill that could delist Chinese companies from U.S. stock exchanges". MarketWatch. Retrieved 13 June 2020.
  2. ^ Thomas Franck (21 May 2020). "Bill to delist Chinese stocks moving at 'warp speed' as a crackdown gains bipartisan support". CNBC. Retrieved 13 June 2020.
  3. ^ Robertson, Benjamin (June 6, 2019). "Latest U.S. Salvo Against Chinese Firms Could Benefit Hong Kong". Bloomberg News. Archived from the original on July 2, 2019. Retrieved September 24, 2019.
  4. ^ Dan Primack (12 May 2020). "Luckin Coffee fires CEO and COO for fraud". Axios. Retrieved 15 June 2020.
  5. ^ Dan Primack (20 May 2020). "Luckin Coffee faces Nasdaq delisting following alleged fraud". Axios. Retrieved 15 June 2020.
  6. ^ Tonya Garcia (26 June 2020). "Luckin Coffee to be delisted from the Nasdaq". MarketWatch. Retrieved 27 June 2020.
  7. ^ https://www.marketwatch.com/story/senate-could-vote-on-bill-that-could-delist-chinese-companies-from-us-stock-exchanges-2020-05-19
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