China is cheating on Obama-era stock market deal, Trump urged to intervene-WTO
Feds acknowledge China hasn't lived up to 2013 deal on Sarbanes-Oxley audits, putting investors at risk. Key China adviser urges Trump to act.
The recent spectacular collapse of a Chinese coffee company and a stark warning by federal regulators are focusing an uncomfortable light on an Obama-Biden era stock market concession to Beijing, one that could become President Trump’s next target.
Since 2013, Chinese companies have been allowed to participate in U.S. stock and bond exchanges without having to fully comply with the same Sarbanes-Oxley Act accounting practices and risk disclosure required of American companies.
The concession was made in a little-noticed Memorandum of Understanding executed seven years ago by the Public Company Accounting Oversight Board (PCOAB), a nonprofit regulator empowered by the Sarbanes-Oxley law to ensure U.S. investors are protected from making bad investments because of faulty audits or financial information.
China’s ability to access the New York Stock Exchange, NASDAQ and other markets without fully complying with the Sarbanes-Oxley accounting rules came during the Obama-Biden second term.
After American and other foreign investors lost billions in Chinese investments between 2010 and 2012 during an era of risky mergers and startups, U.S. regulators began cracking down, including seeking action against the four major accounting firms in China that had refused to provide auditing documents requested by the SEC. The accountants claimed they couldn’t provide the information without violating Chinese privacy laws.
The SEC would eventually settle the accountant cases with fines.
And the PCAOB with the SEC’s blessing proceeded with the MOU with China’s securities regulator. Under the deal, China agreed to let PCAOB gain “timely access” to certain audit documents of its homeland companies, but did not allow on-site audit firm inspections like those imposed on American firms, kicking that compliance issue down the road.
In the end, China never allowed the inspections and mostly failed to comply with the document requests, essentially allowing the country’s U.S.-listed firms to enjoy all the benefits of U.S. stock market access without the need to comply with Sarbanes-Oxley. The SEC and PCAOB has been raising red flags since 2018 but its lack of action has drawn significant criticism.
https://justthenews.com/government/white-house/china-isnt-complying-obama-era-stock-market-deal-trump-urged-intervene