The U.S. Securities and Exchange Commission (SEC) is moving forward with the Trump Administration’s initiative to create legal tools to pressure U.S.- stock exchange-listed Chinese companies to accept federally supervised accounting auditors.
If the new provisions are implemented, Chinese companies with U.S.-traded shares will have to use auditors supervised by U.S. regulators or face expulsion from stock exchanges under a plan that is being finalized; sources told Fox Business.
The proposal aims to address the unequal treatment of Chinese companies participating in the U.S. stock market with respect to other international and local firms. Many Chinese companies have been able to sell shares in the United States for a long time. Still, their auditors do not allow their work to be appropriately inspected by local authorities.
Usually, auditors are supervised by the Public Company Accounting Oversight Board. However, the SEC has been reporting strong reluctance by Chinese firms to be supervised by the Board.
With the new provisions, the SEC seeks to put the responsibility on the New York Stock Exchange and the Nasdaq Stock Market to demand compliance with audit inspections. Without compliance, the Chinese company in question will be de-listed.
The SEC’s moves follow recommendations issued after President Trump in August commissioned a group of key advisors, including Treasury Secretary Steve Mnuchin and SEC Chairman Jay Clayton. Their given task was to draft a report with recommendations to protect U.S. investors from Chinese firms whose audit documents have long been hidden from U.S. regulators, Reuters reported.
According to the Trump administration’s allegations, for many years, Chinese companies have been allowed to take advantage of the U.S. capital markets without being required to comply with local rules, which even their local competitors have to face.
Along the same lines, President Trump and his team are also planning other measures to block the CCP’s advance into the commercial and military worlds, according to recent sources close to the government reported by Axios. Trump would enact the measures over the next 10 weeks to cement his legacy in the face of the CCP abuses.
Actions under consideration include protecting U.S. technology from exploitation by the CCP’s military (Peoples Liberation Army) illegal fishing, and more sanctions against CCP officials or institutions that provoke abuses in Hong Kong or Western Xinjiang, the official said, without providing further details.
The news of new actions against the CCP came less than a week after the Trump administration, through an executive order, cracked down on U.S. investments in Chinese companies.
These actions aim to prohibit Chinese civilian companies with connections to the CCP military (PLA) from being listed on the U.S. stock exchange.
The aim of this new blow by the Trump administration to the CCP is that the large number of Chinese companies connected to its army and intelligence apparatus will not be financed by U.S. private capital.
President Trump was instrumental in introducing his recent Executive Order: “the People’s Republic of China (PRC) is increasingly exploiting U.S. capital to obtain resources and to allow the development and modernization of its military, intelligence and security apparatus. This is causing the People’s Republic of China to directly threaten the homeland of the United States and U.S. forces abroad”.