The US House of Representatives passed the Holding Foreign Companies Accountable Act on Wednesday, which aims to prohibit foreign companies from being listed on American stock exchanges if they fail to allow US regulators to review their financial audits, something several Chinese companies have been accused of.
The bill was previously introduced by Republican Senator for Louisiana, John Kennedy, and Democratic Senator for Maryland, Chris Van Hollen, to increase protection available to American investors from foreign companies that:
- Fail to “comply with the Public Company Accounting Oversight Board (‘PCAOB’) audits for three years in a row”
- Fail to “disclose whether they are owned or controlled by a foreign government”
It was passed unanimously by the Senate in May.
The proposed legislation is set to affect several Chinese companies, such as Alibaba Group Holding Ltd., who have refused to comply with PCAOB audits.
In a press release on Wednesday, Van Hollen and Kennedy criticized the actions of Chinese companies, with Van Hollen claiming that many American investors, “have been cheated out of their money after investing in seemingly-legitimate Chinese companies that are not held to the same standards as other publicly listed companies.”
According to Kennedy, the bill has the support of the US Securities and Exchanges Commission, who, under the bill, will be responsible for overseeing compliance and disclosure.
The proposed legislation will now be sent to President Trump and if signed, enacted into law.
