The Holding Foreign Companies Accountable Act is a 2020 law that requires companies publicly listed on stock exchanges in the

United States The United States of America (USA), also known as the United States (U.S.) or America, is a country primarily located in North America. It is a federal republic of 50 U.S. state, states and a federal capital district, Washington, D.C. The 48 ...

to disclose to the

United States Securities and Exchange Commission The United States Securities and Exchange Commission (SEC) is an independent agencies of the United States government, independent agency of the United States federal government, created in the aftermath of the Wall Street crash of 1929. Its ...

information on foreign jurisdictions that prevent the

Public Company Accounting Oversight Board The Public Company Accounting Oversight Board (PCAOB) is a nonprofit corporation created by the Sarbanes–Oxley Act of 2002 to oversee the audits of US-listed public companies. The PCAOB also oversees the audits of broker-dealers, including co ...

(PCAOB) from conducting inspections. Under the law, such companies will be banned from trading and delisted from exchanges if the PCAOB is not able to audit specified reports for three consecutive years. The bill requires such companies to declare they are not owned or controlled by the

Chinese government The government of the People's Republic of China is based on a system of people's congress within the parameters of a Unitary state, unitary communist state, in which the ruling Chinese Communist Party (CCP) enacts its policies through people's ...

Background

In 2019, a similar bill titled the EQUITABLE Act was introduced by Senator

Marco Rubio Marco Antonio Rubio (; born May 28, 1971) is an American politician, lawyer, and diplomat serving since 2025 as the 72nd United States Secretary of State, United States secretary of state. A member of the Republican Party (United States) , Rep ...

( R- FL) in the

United States Senate The United States Senate is a chamber of the Bicameralism, bicameral United States Congress; it is the upper house, with the United States House of Representatives, U.S. House of Representatives being the lower house. Together, the Senate and ...

over concerns certain foreign companies were non-compliant with oversight and audit rules on American stock exchanges. This was in response to the lack of compliance and transparency among Chinese companies listed on US exchanges, thereby increasing the risk of defrauding investors. The consideration of the Holding Foreign Companies Accountable Act in Congress coincided with the high-profile financial scandal involving Chinese coffee chain

Luckin Coffee Luckin Coffee Inc. () is a Chinese coffee company and coffeehouse chain. It was founded in Beijing in 2017. , it managed 9,351 stores which included 6,310 self-operated stores and 3,041 partnership stores. Monthly active customer numbers reach ...

, which fired both its CEO and COO in May 2020 for

accounting fraud Accounting scandals are business scandals that arise from intentional manipulation of financial statements with the disclosure of financial misdeeds by trusted executives of corporations or governments. Such misdeeds typically involve complex ...

concerning the intentional fabrication of around $310 million in sales in 2019. This subsequently resulted in Luckin's shares plunging by around 80%. Luckin also received a delisting notice from the

Nasdaq The Nasdaq Stock Market (; National Association of Securities Dealers Automated Quotations) is an American stock exchange based in New York City. It is the most active stock trading venue in the U.S. by volume, and ranked second on the list ...

stock exchange on May 19, 2020. On June 26, it was confirmed that Luckin would be delisted from the Nasdaq and Luckin's stock saw its last day of trading.

Legislative history

On May 20, 2020, the bill passed the United States Senate by unanimous consent. On December 2, 2020, the bill passed the

United States House of Representatives The United States House of Representatives is a chamber of the Bicameralism, bicameral United States Congress; it is the lower house, with the U.S. Senate being the upper house. Together, the House and Senate have the authority under Artic ...

by unanimous voice vote. The bill was signed into law by President

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on December 18, 2020.

Implications

As required by the bill, the SEC started publishing in March 2022 a provisional list of foreign issuers that the PCAOB is unable to audit. Days later on 2 April,

China Securities Regulatory Commission The China Securities Regulatory Commission (CSRC) is a government agency directly under the State Council of the People's Republic of China. It is the main regulator of the securities industry in China. History Indicative of the role of the C ...

announced a proposed removal to a requirement that on-site inspections of Chinese companies with foreign listings can only be conducted by Chinese regulatory agencies.

References

{{reflist

External links

S. 945 Senate bill text
United States federal financial legislation Acts of the 116th United States Congress United States federal securities legislation China–United States relations