WASHINGTON (Reuters) – U.S. Secretary of State Mike Pompeo on Thursday warned American buyers against fraudulent accounting practices at China-based companies and stated the Nasdaq’s latest determination to tighten itemizing rules for such gamers ought to be “a model” for all different exchanges around the globe.
FILE PHOTO: U.S. Secretary of State Mike Pompeo attends a lunch hosted by Chinese Foreign Minister Wang Yi along with his counterparts of the everlasting 5 veto-wielding members of the U.N. Security Council in New York, U.S., September 26, 2019. REUTERS/Yana Paskova/File Photo
His remarks on the difficulty, reported first by Reuters earlier than being delivered through a assertion, illustrate the Trump administration’s need to make it tougher for some Chinese companies to commerce on exchanges exterior of China.
President Donald Trump issued a memorandum on Thursday calling for suggestions to be issued inside 60 days to shield U.S. buyers from what he stated was China’s failure to enable audits of U.S.-listed Chinese companies.
“We must take firm, orderly action to end the Chinese practice of flouting American transparency requirements without negatively affecting American investors and financial markets,” Trump wrote.
The statements mark the most recent flashpoint in U.S.-China relations at a time of escalating tensions between the world’s two largest economies over commerce, the coronavirus pandemic and Hong Kong.
“American investors should not be subjected to hidden and undue risks associated with companies that do not abide by the same rules as U.S. firms,” Pompeo stated in his assertion. “Nasdaq’s action should serve as a model for other exchanges in the United States, and around the world.”
“I applaud Nasdaq for requiring auditing firms to ensure all listed companies comply with international reporting and inspection standards,” Pompeo added.
Nasdaq Inc (NDAQ.O) took motion final month and tightened itemizing rules, in a bid to curb preliminary public choices of Chinese companies intently held by insiders and with opaque accounting.
Nasdaq Chief Executive Adena Friedman stated on Thursday addressing the abroad accounting points is a matter for the U.S. Securities and Exchange Commission (SEC).
The change’s tightening of itemizing requirements got here after Chinese coffeehouse chain Luckin Coffee Inc (LK.O), which had a U.S. IPO in early 2019, introduced that an inside investigation confirmed its chief working officer and different workers fabricated gross sales offers.
Trump stated final week his administration would start the method of eliminating particular U.S. therapy for Hong Kong to punish China, saying Beijing’s transfer to impose new nationwide safety laws meant the territory not warranted U.S. financial privileges.
He additionally stated he was instructing a presidential working group to examine the differing practices of Chinese companies listed on the U.S. monetary markets, with the purpose of defending American buyers.
“The real issue is the lack of transparency and the lack of disclosure to the American investors,” Keith Krach, undersecretary for financial progress, vitality and the surroundings on the U.S. State Department, advised Reuters on Wednesday.
“No country should be allowed to lie to the American investors to create an unfair advantage, especially when operating in American markets,” Krach stated.
Many U.S.-listed Chinese companies will possible record on the Hong Kong change this yr, partially due to U.S. political stress, the pinnacle of the change stated Thursday.
The SEC has been locked in a decade-long wrestle with the Chinese authorities to examine audits of U.S.-listed Chinese companies.
In April, SEC chief Jay Clayton, warned buyers against placing cash into Chinese companies due to issues with disclosures.
A senior U.S. official stated he hoped the SEC would evaluate a memorandum of understanding signed with China in 2013, permitting Chinese companies to withhold info if their native legal guidelines forbid them from sharing it.
“That waiver should probably be reviewed at this point in time as to whether it is still appropriate and if not be rescinded,” he stated, including that the choice was up to the SEC.
Reporting by Humeyra Pamuk; extra reporting by Echo Wang and John McCrank; Editing by Chris Sanders, Edward Tobin, Nick Zieminski and Tom Brown