WASHINGTON: “Significant issues remain” in reaching a deal with China over a long-running dispute around auditing compliance of China-based companies listed on US stock exchanges, a US Securities and Exchange Commission (SEC) official said yestersday.
The SEC’s international affairs chief, YJ Fischer, told an audience that the agency’s accounting body, the US Public Company Accounting Oversight Board (PCAOB), would need to complete China audit inspections by Nov 22 to meet a US deadline that will require non-compliant Chinese companies to delist by early 2023.
Fischer added that Chinese authorities should consider delisting from US exchanges a “subset of issuers” that it deems “too sensitive to comply” with US rules.
“While there has certainly been progress in the discussions on audit inspections in China and Hong Kong, significant issues remain,” said Fischer. “Even if an agreement is signed between the PCAOB and Chinese authorities, it will only be a first step,” she said, since the United States would then need to commence on-the-ground inspections.
In December, the SEC mandated that Chinese companies listed on US stock exchanges must disclose whether they are owned or controlled by a government entity, and provide evidence of their auditing inspections.
Under the rule, which implements a law passed by Congress in 2020, more than 200 companies – including Alibaba, Baidu Inc and Weibo Corp – could be kicked off US exchanges if they are not compliant by the beginning of 2023.
Unlike many countries, China has not allowed the accounting regulator to inspect Chinese company auditors due in part to national security concerns. US regulators worry the lack of US oversight is putting investors at risk.
Several media outlets including Reuters had previously reported that there had been progress on the talks. While Fischer confirmed that, he warned time was nevertheless “running out” to reach a workable deal before next year. – Reuters
