The United States has been discussing a new legislative initiative for a month - the Holding Foreign Companies Accountable Act. This bill obliges foreign companies to prove the fact that foreign governments do not own any stake in them. If this fails, or American regulators are unable to conduct an audit, delisting, that is, the forcible withdrawal of a company's shares from trading on US stock exchanges, may become a punishment.
Analysts believe that the bill is mainly directed against Chinese companies like Alibaba and Baidu. How serious everything is, and what is the reason for the tightening of control - we understand our new material.
What happened
In late May, the US Senate unanimously supported the Holding Foreign Companies Accountable Act. According to the text of the document, foreign companies will be required to be transparent in order to conduct an audit and provide evidence of a lack of control by foreign governments.
If the company cannot clearly prove this fact, or the Public Company Accounting Oversight Board (PCAOB) fails to audit the company for three consecutive years, the shares of such a company will be banned from trading on the US stock exchanges.
According to the authors of the bill, the Chinese government currently does not allow the PCAOB to audit companies registered in China and Hong Kong. In total, shares of 224 companies from countries where there are similar obstacles - most of them Chinese - are traded on US stock exchanges. The total capitalization of such companies is more than $ 1.8 trillion.
In a response, the Chinese Equity Regulatory Commission (an analogue of the American SEC) declared its rejection of "such acts of politicizing the regulation of shares." The text also states that Chinese regulators are making every effort to better cooperate with foreign counterparts to conduct audits.
How the new law could affect Chinese business
The tightening of rules in the United States could negatively affect plans to raise funds on the stock exchange of many large Chinese companies. For example, Bloomberg analysts predict the difficulties with the IPO of the owner of TikTok ByteDance and Ant Financial of billionaire Jack Ma.
At the same time, the discussion of the bill has been going on for some time, so Chinese companies are preparing for its possible adoption. For this, many of them have already held an IPO in Hong Kong.
The passage of the bill in the Senate negatively impacted the value of shares of large Chinese companies trading in the United States. However, experts do not yet expect more serious problems for them. The fact is that in order to enter into force, the bill on new audit requirements must also receive the approval of the House of Representatives, and then the President of the country.
So far, the shares of Chinese companies Alibaba, Baidu and others are traded on American exchanges without restrictions. This means that you can buy them from Russia and you can without the need to open a separate brokerage account with foreign brokers. With the help of the foreign securities market of the St. Petersburg Stock Exchange, investors can buy 500 liquid shares of leading companies in all sectors of the world economy, including all shares of the S&P 500 index.
To carry out transactions with such shares, you need a brokerage account - you can open it online .
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