SEC Ready For Vote On Plan To Delist Chinese Firms

The Securities and Exchange Commission (SEC) is moving forward with a plan that could boot Chinese companies from U.S. stock exchanges, Bloomberg reported.

The regulation, intended to be introduced before year’s end, would have the effect of delisting companies for not following U.S. auditing rules. The issue has been fast-tracked since August and centers around the refusal from China to let U.S. inspectors from the Public Company Accounting Oversight Board (PCAOB) look over audits from Alibaba, Baidu, and other firms trading in American markets, Bloomberg reported.

The rising tensions between the two countries have exacerbated the problem, according to Bloomberg, while the accounting scandal at China’s Luckin Coffee didn’t help, either. Leaders in China, according to PYMNTS, have reportedly begun compiling a blacklist of U.S. companies which would be targeted for punishment in the ongoing spat over data privacy with TikTok and WeChat still moving through the courts.

The move by the SEC could further stir the pot between the two superpowers as the President Donald Trump administration winds down heading into January. The move is also unusual in that SEC Chairman Jay Clayton will step down when Trump leaves in January, and no legislation is likely to be finished in that short a time, which leaves President-elect Joe Biden to choose a new SEC leader and continue with the issue, Bloomberg reported.

But by pushing a vote through now, Clayton will force both Republican and Democratic members of the commission to go on record as saying whether they support harsher restrictions on Chinese companies, which is a rare example of an issue with bipartisan support in Congress right now, Bloomberg reported.

The issues with audit inspections go back to the 2002 Sarbanes-Oxley Act, which was set up after the collapses of Enron and WorldCom and instituted the PCAOB to regularly inspect the companies that look over other companies’ books.