“Because Beijing is determined to exploit American investors, I’ve been fighting for more accountability for foreign companies that use American capital. The SEC finally has the power it needs to kick fraudulent Chinese companies off U.S. exchanges more quickly and remind China that playing by the rules isn’t optional.”
MADISONVILLE, La. – Sen. John Kennedy’s (R-La.) Accelerating Holding Foreign Companies Accountable Act became law today as part of a package of bills. Kennedy’s legislation will increase accountability for Chinese companies that refuse to submit to U.S. financial oversight and close a loophole that Chinese companies use to avoid such oversight.
“Companies that are beholden to the Communist Chinese Party have been flouting America’s security laws and putting Americans’ retirement savings at risk. Because Beijing is determined to exploit American investors, I’ve been fighting for more accountability for foreign companies that use American capital. The SEC finally has the power it needs to kick fraudulent Chinese companies off U.S. exchanges more quickly and remind China that playing by the rules isn’t optional,” said Kennedy.
In December 2020, the president signed into law Kennedy’s Holding Foreign Companies Accountable Act, which prohibits foreign companies from listing their securities on any of the U.S. exchanges if the company has failed to comply with the Public Company Accounting Oversight Board’s (PCAOB) audits for three years in a row. The law protects the interest of hardworking American investors by ensuring that foreign companies traded in America are subject to the same independent audit requirements that apply to their competitors in America and other countries.
The Accelerating Holding Foreign Companies Accountable Act will build on this progress by putting additional pressure on China. Kennedy’s legislation requires foreign companies to comply with PCAOB audits within two consecutive years instead of three. This would help remove fraudulent and non-compliant companies from U.S. exchanges more quickly so they cannot continue to put hardworking Americans at risk.
Congress established the PCAOB to inspect audits of public companies, ensuring the information companies provide to the public is accurate, independent and trustworthy.
Historically, China’s communist government has refused to allow the PCAOB to inspect audits of companies registered in China and Hong Kong. Such companies represent a keen risk to American investors as nearly 11 percent of all securities class action lawsuits in 2011 were brought against Chinese-owned companies accused of misrepresenting themselves in financial documents.
According to the Securities and Exchange Commission, 224 U.S.-listed companies are located in countries where there are obstacles to PCAOB inspections. These companies have a combined market capitalization of more than $1.8 trillion.
In the last 10 years, the number of Chinese companies listed on U.S. stock exchanges has increased significantly, as those firms take advantage of the capital available in America.