SEC Rule Change Could Fuel Chinese Delistings
Delisting pressures against China continue to intensify even in the eleventh hour of the 45th U.S. Presidency, as the Securities and Exchange Commission seeks to boot companies for not complying with domestic auditing rules.
By the end of the year, the SEC will propose a regulation that would lead companies to be delisted for not complying with U.S. auditing rules, according to a «Bloomberg» report citing unnamed sources.
The report adds that agency officials have made haste to put the rule to effect since August through the President’s Working Group on Financial Markets, whose members include SEC chairman Jay Clayton and Treasury Secretary Steven Mnuchin. The new restrictions could take effect as soon as 2022.
According to the SEC, there were more than 150 Chinese companies traded on American exchanges as of 2019 with a combined value of $1.2 trillion.
Accounting Transparency
The risk of lacking transparency from Chinese firms listed in the U.S. was best evidenced by the Luckin Coffee accounting scandal and authorities have since then increased scrutiny on the matter.
Chinese firms are also facing headwinds from NASDAQ which is reportedly seeking to tighten rules with requirements for higher minimum IPO sizes and for auditing firms to meet global compliance standards.
