Spartz, others aim to hold foreign companies accountable
Congresswoman Victoria Spartz (R-IN), along with Congressman Brad Sherman (D-CA), who Chairs the Subcommittee on Investor Protection and Capital Markets, and Congressman Andy Barr (R-KY) introduced the Accelerating Holding Foreign Companies Accountable Act – legislation that would increase accountability for the auditors of U.S.-listed foreign companies currently not subject to oversight by U.S. regulators.
In 2020, Congress passed, and the President signed into law, the Kennedy-Sherman Act (Holding Foreign Companies Accountable Act) which prohibits the shares of foreign companies from continuing to be listed on U.S. exchanges if a company’s auditor is not overseen by the U.S. Public Company Accounting Oversight Board’s (PCAOB) for three years in a row. For over a decade, Chinese authorities have effectively blocked the PCAOB from conducting effective oversight of audit firms based in China and Hong Kong. However, these audit firms currently serve as the primary auditor for 191 companies publicly traded in the U.S. with a combined global market capitalization of $1.9 trillion.
The Accelerating Holding Foreign Companies Accountable Act would put additional pressure on China by requiring foreign auditors to allow PCAOB inspections or risk publicly traded companies being de-listed from U.S. exchanges if inspections do not happen after two consecutive years rather than three. This legislation represents a House companion to S.2184, a bill introduced by Senators John Kennedy (R-LA) and Marco Rubio (R-FL) which was passed by the Senate on June 22, 2021. Sherman also held a hearing in his subcommittee on this bill on October 26, 2021.
“As someone who spent over a decade in public accounting and auditing, I understand and value the importance of investor protection and proper quality control of audits,” Spartz said. “It’s our responsibility to protect the public and I am happy to co-lead a bipartisan, bicameral initiative to start leveling the playing field and increase accountability for Chinese companies listed on U.S. stock exchanges.”
“The Holding Foreign Companies Accountable Act may be the most significant piece of investor protection legislation passed in several years,” Sherman, Chair of the Investor Protection and Capital Markets subcommittee, said. “It is designed to assure Financial Statement integrity of 191 U.S.-listed companies with over $1.9 trillion in market capitalization. The purpose is not to de-list any company, but to persuade China to allow the audit oversight that U.S. investors need, and the U.S. investors get when investing in all U.S. companies as well as companies in over 50 foreign jurisdictions.”
“This bill builds off of the bipartisan Holding Foreign Companies Accountable Act to protect investors, ensure the integrity of financial statements and create a level playing field for issuers on U.S. exchanges,” said Barr, Ranking Member of the House Subcommittee on National Security, International Development and Monetary Policy. “I am pleased to join Reps. Sherman and Spartz in this effort to hold China accountable.”