Andrew Olmem, Christina Thomas, and Jason Elder are partners at Mayer Brown LLP. This post is based on their Mayer Brown memorandum.
Foreign public companies listed in the United States may soon face delisting if their auditors cannot comply with US investor protection laws. On December 2, 2020, the US House of Representatives passed by voice vote the Holding Foreign Companies Accountable Act (HFCAA), which would require auditors of foreign public companies to allow the Public Company Accounting Oversight Board (PCAOB) to inspect their audit work papers for audits of non-US operations as required by the Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley). If a company’s auditors fail to comply for three consecutive years, then the company’s shares would be prohibited from trading in the United States. The legislation passed the Senate in May and is now being sent to President Donald Trump, who is expected to sign it into law.
The HFCAA aims to address restrictions China has placed on the PCAOB’s ability to inspect or investigate PCAOB-registered public accounting firms in connection with their audits of Chinese companies. Sarbanes-Oxley created the PCAOB “to oversee the audit of public companies that are subject to the securities laws, and related matters, in order to protect the interests of investors and further the public interest in the preparation of informative, accurate, and independent audit reports for companies the securities of which are sold to, and held by and for, public investors.” [1] Specifically, the PCAOB is responsible for registering public accounting firms, establishing standards applicable to the preparation of audit reports for companies, conducting inspections and investigations of public accounting firms to ensure they are complying with those standards, and bringing enforcement actions when they are not. [2]
A Letter to the SEC Chairman
More from: Elizabeth Warren
Elizabeth Warren is U.S. Senator from Massachusetts. This post is based on her letter to outgoing SEC Chairman Jay Clayton.
I am writing in regards to the notice that the Securities and Exchange Commission (SEC or the Commission) will, on Wednesday, December 16, 2020, consider adopting rules that “will require resource extraction issuers to disclose payments made to the U.S. federal government or foreign governments for the commercial development of oil, natural gas, or minerals.” [1] While these rules are mandated by Section 1504 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), [2] which requires “that all oil, gas, and mineral companies on the
U.S. stock exchange disclose any payments they make to foreign governments for licenses or permits for development,” [3] the SEC’s proposal fails to combat corruption and hold bad actors accountable. Instead, the SEC’s proposal “would make such disclosures so general as to be of little value.” [4] Rather than rushing to push through a grievously flawed final rule in the final few days of the Trump administration and your tenure as SEC chair, the Commission should not hold a vote on the rule until these concerns are addressed.
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