Speech: Resolving the Lack of Audit Transparency in China and Hong Kong
U.S. Securities and Exchange Commission
Thank you, Ken, for that kind introduction. I am glad to be here with you today. As I approach my first anniversary as the Director of the SEC’s Office of International Affairs, it is my pleasure to have this opportunity to share ideas with you on how best to carry out the goal of serving investors. Cooperation between regulators and the industry is critical to the SEC’s mission. I am impressed by the event that SIFMA has organized. The program over the last two days covers some of the most important global issues affecting the international securities industry, including cross-border regulation, crypto, sustainable finance, and, of course, China.
Before I proceed, let me issue the standard disclaimer that the views I express today are my own and do not necessarily reflect the views of the Commission, the Commissioners, or other members of the Commission’s staff.
Today, I would like to focus on the recent regulatory developments related to the lack of US inspections of audits and investigations in China and Hong Kong, and the implications for continued trading of China-based issuers on US exchanges. For more than a decade, local authorities in those jurisdictions have hampered the Public Company Accounting Oversight Board’s (“PCAOB”) ability to obtain audit work papers and interview audit engagement personnel as statutorily mandated. This situation is untenable because, among other things, it exposes US investors to significant risks.
Biden administration concerned about U.S. investments in Chinese tech companies with military or surveillance ties
In 2020, a fast-rising artificial intelligence company in China won a little-noticed contract from a Chinese military academy to provide battlefield command software — technology that defense experts say could become part of the military’s operational network.
Many major stock and bond indices developed by index providers like MSCI and FTSE include companies that are listed on the Department of Commerce’s Entity List and/or the Department of Defense’s List of “Communist Chinese military companies” (CCMCs).