The House of Representatives has passed a new bill designed to stop fraudulent overseas firms listed on US stock markets from escaping scrutiny from the Securities and Exchange Commission (SEC).
The bipartisan Holding Foreign Companies Accountable Act will prohibit overseas firms from the record any of the securities on US exchanges should they don’t obey the Public Company Accounting Oversight Board’s (PCAOB) audits for three years in a row.
The PCAOB’s function is to ascertain whether the data presented by listed companies is precise, independent, and dependable.
The legislation will also require public companies to disclose if they are possessed or controlled by a foreign government.
It is therefore not difficult to see where the invoice is mostly aimed. Beijing currently won’t let PCAOB audits of homegrown businesses despite being in discussions with the US government for more than ten years. Vague national safety issues are frequently cited as a barrier to progress.
This lack of scrutiny led to US investors in Chinese company Luckin Coffee losing substantial sums following the Starbucks competition was discovered to possess fabricated earnings by countless millions of dollars.
“Millions of American households rely on small investments to retire, send their children to weather and college fiscal crises. But most have been scammed out of the money after investing in apparently legitimate Chinese businesses which aren’t held to the very same criteria as other publicly listed firms,” claimed Van Hollen.
“This invoice rights that incorrect, making sure that all businesses on US exchanges abide by the very same rules. I have been pleased to use senator Kennedy with this particular legislation, and I am pleased to see it pass the House with such powerful support.
The bill won’t just target Chinese companies, but their number has surged greatly on US exchanges lately as they want to raise funds overseas.
According to the SEC, 224 US-listed organizations can be found in states where there are hurdles to PCAOB inspections, using a combined market capitalization of over $1.8tn.