On Friday, December 18, President Trump signed into law Senate Bill 945, the Holding Foreign Companies Accountable Act (Act). As analyzed in our initial client alert, Delisting from Exchanges, the core of the Act paves the way for delisting Chinese companies from US exchanges if the audits of those companies remain shielded from the Public Company Accounting Oversight Board (PCAOB), a situation primarily caused by the conflict between US securities regulations requiring audit visibility and Chinese laws prohibiting the export of such information. Our subsequent publication, Report on Protecting United States Investors, discussed that, while delisting these companies could achieve the goal of leveling the playing field of equities trading in the US (and potentially other international exchanges), such a move could also facilitate China’s long-standing goal of enticing more companies to list on its domestic exchanges while leaving retail investors to sell off shares ahead of potential delisting, likely at significantly discounted rates.
