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8/10/2020

President’s Working Group on Financial Markets Releases Report and Recommendations on Protecting Investors from …

President’s Working Group on Financial Markets Releases
Report and Recommendations on Protecting Investors from
Significant Risks from Chinese Companies
August 6, 2020

WASHINGTON – In response to President Trump’s June 4 Memorandum on Protecting
United States Investors from Significant Risks from Chinese Companies, the President's
Working Group on Financial Markets (PWG) today released a report making five
recommendations. These recommendations are designed to address risks to investors in
U.S. financial markets posed by the Chinese government’s failure to allow audit firms that
are registered with the Public Company Accounting Oversight Board (PCAOB) to comply with
U.S. securities laws and investor protection requirements.
“The PWG examined the risks to investors posed by the Chinese government’s failure to
allow access. The PWG unanimously recommends that the Securities and Exchange
Commission take steps to enhance the listing standards on U.S. exchanges for access to
audit work papers, among other recommendations,” said Secretary Steven T. Mnuchin,
Chairman of the PWG. “The recommendations outlined in the report will increase investor
protection and level the playing field for all companies listed on U.S. exchanges. The United
States is the premier jurisdiction in the world for raising capital, and we will not compromise
on the core principles that underpin investor confidence in our capital markets.”
The PWG recommends that the SEC take steps to implement the five recommendations
outlined in the report. In particular, to address companies from jurisdictions, such as China,
that do not provide the PCAOB with su icient access to fulfill its statutory mandate (“NonCooperating Jurisdictions,” or “NCJs”), the PWG recommends enhanced listing standards on
U.S. exchanges. This would require, as a condition to initial and continued exchange listing,
PCAOB access to work papers of the principal audit firm for the audit of the listed company.
Companies unable to satisfy this standard as a result of governmental restrictions on access
to audit work papers and practices in NCJs may satisfy this standard by providing a co-audit
from an audit firm with comparable resources and experience where the PCAOB determines
it has su icient access to audit work papers and practices to conduct an appropriate
https://home.treasury.gov/news/press-releases/sm1086

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8/10/2020

President’s Working Group on Financial Markets Releases Report and Recommendations on Protecting Investors from …

inspection of the co-audit firm. To reduce market disruption, the new listing standards could
provide for a transition period until January 1, 2022 for currently listed companies.
The other recommendations include requiring enhanced and prominent issuer disclosures
of the risks of investing in certain NCJs such as China; enhancing registered fund disclosures
for funds exposed to issuers from NCJs; encouraging or requiring registered funds that track
indexes to perform greater due diligence on an index and its index provider; and issuing
guidance to investment advisers with respect to fiduciary obligations when considering
investments in NCJs.
In addition to the Secretary of the Treasury, the PWG includes the Chairman of the Board of
Governors of the Federal Reserve System, the Chairman of the Securities and Exchange
Commission and the Chairman of the Commodity Futures Trading Commission. The PWG
also sought the views of the Federal Reserve Bank of New York, the O ice of the Comptroller
of the Currency and the Federal Deposit Insurance Corporation in preparing its report.
View the President’s Working Group on Financial Markets: Report on Protecting United
States Investors from Significant Risks from Chinese Companies

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https://home.treasury.gov/news/press-releases/sm1086

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