Chinese companies that do not comply with laws requiring inspection of their auditing process by U.S. regulators will be forced off American stock exchanges starting in 2024, Securities and Exchange Commission Chairman Gary Gensler wrote in a Wall Street Journal op-ed late Monday.
Gensler pointed to the Holding Foreign Companies Accountable Act, passed unanimously by Congress last year and signed into law by President Trump, which prohibits trading an issuer’s stock unless the Public Company Accounting Oversight Board is allowed by foreign jurisdictions to oversee their audits.
After three years of noncompliance, the law requires U.S. exchanges to delist an issuer’s stock. “The SEC has taken all the required steps to implement this law, and the oversight board is on track to finalize its relevant rulemaking before the end of the year,” Gensler wrote. “The three-year clock began ticking in 2021.”
The law applies to all foreign companies, but is directed at China, the only country that has failed to reach an agreement with U.S. regulators allowing the audit process that was required by the 2002 Sarbanes-Oxley Act, passed into law in the wake of the Enron and WorldCom accounting scandals.
“Now it’s up to Beijing to let the oversight board in so we can ensure the relevant audits are up to U.S. standards,” Gensler wrote. “Early next year I expect we will announce which companies, if any, used an auditor that didn’t open its workpapers to U.S. overseers. If these companies use an audit firm in a noncompliant jurisdiction for two more years consecutively, their shares will be prohibited from trading in our capital markets beginning in 2024.”