WASHINGTON – Sens. John Kennedy (R-La.) and Marco Rubio (R-Fla.) today called on Securities and Exchange Commission (SEC) Chairman Gary Gensler to ensure the Public Company Accounting Oversight Board (PCAOB) will continue enforcing the Holding Foreign Companies Accountable Act when companies refuse to open their records to inspection.
“We write to request your assurance that the unprecedented replacement of the members of the Public Company Accounting Oversight Board (PCAOB) by the Commission will not cause a change or delay in policy with respect to the audits of issuers based in foreign countries, including the People’s Republic of China (‘China’),” the senators wrote.
“As you know, the Holding Foreign Companies Accountable Act (P.L. 116-222) was enacted on December 18, 2020. This landmark law will protect the interests of hardworking American investors by ensuring that foreign companies traded in America are subject to the same independent audit requirements that apply to American companies. In particular, this law is critical to safeguarding Americans’ savings from being invested in entities based in China that pose unacceptable risk under U.S. law,” the senators continued.
“On May 13, 2021, the PCAOB proposed Rule 6100, Board Determinations Under the Holding Foreign Companies Accountable Act. The proposed rule would provide a framework to guide the PCAOB in carrying out the responsibilities under the Act, and was publicly supported by four board members at the time of its proposal. Ultimately, the proposed rule represents the first step toward fairly enforcing U.S. law to protect American investors. However, since the rule was proposed, the Commission announced the removal of the Chairman of the PCAOB and its intent to seek candidates for all five board positions,” the senators continued.
The senators asked Gensler whether the SEC will appoint new PCAOB board members who will faithfully implement the Holding Foreign Companies Accountable Act and whether the SEC expects any delay in the implementation of the Act as a result of the PCAOB’s change in leadership. The senators also inquired whether the SEC took into account the previous PCAOB leaders’ positions on the Holding Foreign Companies Accountable Act before it removed them from the board.
“We urge that the Commission and PCAOB continue the critical work of implementing the Holding Foreign Companies Accountable Act without delay,” the senators concluded.
Last December, President Trump signed into law Kennedy’s Holding Foreign Companies Accountable Act. The law protects American investors by prohibiting securities of a company from being listed on any of the U.S. securities exchanges if the company has failed to comply with the PCAOB’s audits for three years in a row. It also requires public companies to disclose whether they are owned or controlled by a foreign government, including China’s communist government.
This week, the Senate unanimously passed the Accelerating Holding Foreign Companies Accountable Act. The bill would put additional pressure on China by requiring foreign companies to comply with PCAOB audits within two consecutive years instead of three. The bill would also apply the Holding Foreign Companies Accountable Act to Chinese companies that use audit firms in Taiwan or Singapore and do not comply with PCAOB inspections because of Chinese law.
The letter is available here.