The Securities and Exchange Commission (SEC) last week adopted rules finalizing amendments regarding implementation of submission and disclosure requirements in the Holding Foreign Companies Accountable Act (HFCAA).
The rules apply to registrants the SEC identifies as having filed an annual report with an audit report issued by a registered public accounting firm located in a foreign jurisdiction the Public Company Accounting Oversight Board (PCAOB) cannot inspect or investigate.
“We have a basic bargain in our securities regime, which came out of Congress on a bipartisan basis under the Sarbanes-Oxley Act of 2002,” SEC Chair Gary Gensler said. “If you want to issue public securities in the U.S., the firms that audit your books have to be subject to inspection by the PCAOB. This final rule furthers the mandate that Congress laid out and gets to the heart of the SEC’s mission to protect investors. The Commission and the PCAOB will continue to work together to ensure that the auditors of foreign companies accessing U.S. capital markets play by our rules. We hope foreign governments will, working with the PCAOB, take action to make that possible.”
Under the amendments, Commission-Identified Issuers would be required to submit documentation to the SEC establishing that it is not owned or controlled by a governmental entity in the public accounting firm’s foreign jurisdiction.
Additionally, the revisions would require a Commission-Identified Issuer deemed a foreign issuer, provide additional disclosures in its annual report for itself and any of its consolidated foreign operating entities, per officials.
The SEC indicated that the amendment adopting release is slated to be published on SEC.gov and the Federal Register.