Senate passes Kennedy bill to strengthen America’s protection against fraudulent foreign companies
Jun 22 2021
WASHINGTON – The Senate today passed Sen. John Kennedy’s (R-La.) Accelerating Holding Foreign Companies Accountable Act. The bill would increase accountability for Chinese companies that refuse to submit to U.S. financial oversight and close a loophole that Chinese companies use to avoid such oversight.
“When foreign companies flout America’s security laws, they put Americans’ retirement plans and savings at risk. China is bent on exploiting American investors, so we need more accountability for foreign companies using American capital, and we need it now. I’m pleased to see the Senate take a huge step today by voting to give the SEC the ability to kick fraudulent Chinese companies off U.S. exchanges more quickly. I hope the House sends this common-sense bill to the president’s desk before foreign companies swindle more workers and families here at home,” said Kennedy.
Last December, President Trump signed into law Kennedy’s Holding Foreign Companies Accountable Act, which prohibits foreign companies from listing their securities on any of the U.S. exchanges if the company has failed to comply with the Public Company Accounting Oversight Board’s (PCAOB) audits for three years in a row. The law protects the interest of hardworking American investors by ensuring that foreign companies traded in America are subject to the same independent audit requirements that apply to their competitors in America and other countries.
The Accelerating Holding Foreign Companies Accountable Act would put additional pressure on China by requiring foreign companies to comply with PCAOB audits within two consecutive years instead of three. This would help remove fraudulent and non-compliant companies from U.S. exchanges more quickly.
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.
“ASA applauds the Senate for coming together once again and unanimously passing common sense legislation to protect the American people and end Communist China’s exploitation of our capital markets. We thank Senator Kennedy for his leadership in accelerating a timeline which now forces Chinese companies to comply with our audit and regulatory requirements much quicker, and we urge the House to swiftly move this bill to the President’s desk. A bipartisan Washington is finally waking up to the China threat and it’s time for Wall Street to do the same. U.S. exchanges must ensure American investor money is not used to finance Beijing’s egregious human rights abuses and genocide by immediately halting Chinese company IPOs and delisting every Chinese company from their exchange until those companies can prove they are NOT controlled by the CCP,” said American Securities Association CEO Chris Iacovella.
Congress established the PCAOB to inspect audits of public companies, ensuring the information companies provide to the public is accurate, independent and trustworthy.
Currently, China’s communist government refuses to allow the PCAOB to inspect audits of companies registered in China and Hong Kong. Such companies represent a keen risk to American investors as nearly 11 percent of all securities class action lawsuits in 2011 were brought against Chinese-owned companies accused of misrepresenting themselves in financial documents.
According to the Securities and Exchange Commission, 224 U.S.-listed companies are located in countries where there are obstacles to PCAOB inspections. These companies have a combined market capitalization of more than $1.8 trillion.
In the last 10 years, the number of Chinese companies listed on U.S. stock exchanges has increased significantly, as those firms take advantage of the capital available in America.
Text of the Accelerating Holding Foreign Companies Accountable Act is available here.