Senators press SEC chair on Chinese issuers, PCAOB access and possible delistings
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Summary
Several senators warned that China-based firms listed in U.S. markets can shield audits and limit oversight; Chairman Atkins pointed to new PCAOB board members and an SEC concept release on foreign private issuers as steps toward addressing inspection and disclosure gaps.
Senators told the committee they are concerned about Chinese companies listed on U.S. exchanges that use variable-interest entities (VIEs) and offshore incorporations that can shield underlying business operations from U.S. auditors and regulators.
Senator Ricketts noted there were roughly 286 Chinese companies listed on U.S. exchanges and said 151 are VIE structures representing about $1 trillion in U.S. investor capital. He asked whether the SEC believes American investors understand the limits of those structures and whether noncompliant firms should be delisted.
Chair Atkins agreed there are "a number of issues to work out," said the SEC recently swore in new Public Company Accounting Oversight Board (PCAOB) members and that the PCAOB will focus on China-related audit matters. Atkins also pointed to a summer concept release on foreign private issuers and said the agency is reviewing accommodations given to such issuers when the home-country regulatory regime may not provide comparable oversight.
Atkins told senators the SEC's cross-border task force has suspended trading in a number of Asia-based issuers where manipulation was suspected and the agency is working with self-regulatory organizations on stop-trading and delisting where filings are not current or manipulation is evident. Senators urged aggressive use of those tools and closer PCAOB oversight to protect U.S. investors.
The committee did not vote on delisting policy but left the issue flagged for follow-up oversight and potential regulatory or legislative remedies.