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Markets Live, Wednesday, November 18, 2020



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Billionaire Jack Ma, president of Alibaba Group Holding Ltd., smiles as he was spinning the floor of the New York Stock Exchange in 2014.

Billionaire Jack Ma, president of Alibaba Group Holding Ltd., smiles as he was spinning the floor of the New York Stock Exchange in 2014.Credit:Bloomberg

The issue is a problem that U.S. regulators have overturned for more than a decade: China has refused to review audits from the Public Company Accounting Supervisory Board in Alibaba, Baidu and other companies trading in the American markets. The issue has taken on greater urgency due to tensions between the two countries and this year Luckin Coffee Inc. as a result of the high-profile accounting scandal in the company.

The SEC move is unusual because most agencies stop issuing important new policies after the presidential election, especially when a new party is taking power. In addition, the rule is likely to end before President Donald Trump’s term ends on January 20th. Clayton, who plans to step down by the end of the year, will also disappear before any regulations are finalized. This would make up an SEC leader elected by President-elect Joe Biden.

The SEC did not immediately respond to the request for comment.

Chinese stock charts have attracted Trump’s attention, with attacks on China as a result of the coronavirus pandemic and other complaints. Last week, he signed an order banning U.S. investment in Chinese-owned or controlled companies. The SEC’s work on a proposal was previously reported in the Wall Street Journal.

The fight over audits is the Sarbanes-Oxley Act of 2002, which, after the fall of Enron and WorldCom, revised the regulations on public company audits. The law created the PCAOB and required regular audits of companies that review company books. Even if they affect U.S. markets if they apply to foreign companies around the world – and allow more than 50 foreign jurisdictions to review them – China has refused, citing strict confidentiality rules.

U.S. and Chinese officials have repeatedly failed to reach a compromise. Meanwhile, Chinese companies have continued to make it public through U.S. stock markets, even if U.S. law is not taken into account.

The report by the President’s Working Group, which is pushing for SEC action, recommends that exchanges such as the New York Stock Exchange and the Nasdaq avoid listing companies that do not comply with U.S. regulations. The report called for the SEC to adopt new rules, but they should not be put in place until January 2022 to avoid market disruptions.

U.S. investors ’exposure to Chinese stocks is growing, according to the SEC. More than 150 companies in the country, with a combined value of $ 1.2 trillion, were traded on American exchanges from 2019 onwards.

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