by Pam Martens and Russ Martens at Wall Street on Parade
This past Friday, five state-owned companies in China announced that they would apply this month to delist their shares from the New York Stock Exchange. The companies plan to continue trading in Hong Kong and mainland China. The companies include the large oil company Sinopec; China Life Insurance; Aluminum Corporation of China; PetroChina; and Sinopec Shanghai Petrochemical Company. It is highly likely (and long overdue) that more Chinese share delistings on U.S. exchanges will follow.
For the past two decades, China has been stonewalling U.S. regulators over access to the work papers of auditors of publicly traded companies that are based in China but listed on U.S. stock exchanges. China takes the position that these audit work papers hold state secrets and it prohibits audit firms from releasing the documents directly to U.S. regulators, effectively flouting U.S. accounting law.
This untenable situation finally forced the hand of Congress to take a stand in December of 2020. Both houses of Congress unanimously passed legislation called the Holding Foreign Companies Accountable Act. The legislation requires that the Securities and Exchange Commission (SEC) identify companies that are listed in the U.S. which the Public Company Accounting Oversight Board (PCAOB) cannot “inspect or investigate completely because of a position taken by an authority in the foreign jurisdiction.”
The legislation also requires the listed companies to provide documentation showing that they are not owned or controlled by a governmental entity. It also requires that the SEC prohibit the trading of the company’s stock in the U.S. if its audits cannot be inspected for three consecutive years.
According to the U.S.-China Economics and Security Review Commission (USCC),…
Continue Reading