SEC’s Gensler Says It’s Unclear If China Will Avoid Delistings

• SEC chief says up to Beijing to grant access to audit papers
• Chinese companies face possible US delistings as soon as 2024

Securities and Exchange Commission Chair Gary Gensler says it’s unclear if American and Chinese authorities will reach a deal to avoid the delisting of some 200 companies from US stock exchanges.

Gensler said on Tuesday during an interview on Bloomberg Television’s “Balance of Power With David Westin” that it’s ultimately Beijing’s decision whether to grant access to American audit inspectors as required by US law. He added that talks between the two sides had been “constructive.”

“I just really don’t know right now,” he said over the prospects of reaching a deal. “It’s going to be choices made by the authorities there.”

The clock is ticking to avoid congressionally imposed deadline of a 2024 for kicking businesses off the New York Stock Exchange and Nasdaq Stock Market unless American regulators get full access to inspect their audit work papers.

The US and China have been at odds for two decades over the legal requirement, which is meant to protect investors from accounting frauds and other financial malfeasance. The 2024 deadline stems from a 2020 law called the Holding Foreign Companies Accountable Act that was popular with both Democrats and Republicans.

Dozens of other countries permit the US audit inspections, giving American officials the go ahead to interview local accountants and scrutinize the documentation underlying their work. China and Hong Kong have refused, citing confidentiality laws and national security concerns.

Provisional list

Earlier this year, the SEC started publishing a “provisional list” of companies that could face removal. While the move had long been telegraphed, it fueled a sharp decline in US shares of companies based in China and Hong Kong.

Pressure for Beijing and Washington to reach a deal to avoid delistings is being amplified by measures under consideration in the US Congress that call for the process be sped up. If those become law, Chinese audit firms would have even less time to comply.

In Tuesday’s wide-ranging interview, Gensler also discussed crypto regulation. While he declined to say whether the SEC might release new rules for digital assets, Gensler said his agency had longstanding authorities to regulate the sector.

He also touched on his plans to overhaul how stock trades are routed, noting the SEC had received “helpful” feedback from market participants since first unveiling the ideas at a conference in June.

Authors: Lydia Beyoud, David Westin, Bloomberg