Discussion Grows in U.S. Over Laxer Treatment of Developing Nation Listings
What’s new: U.S. Securities and Exchange Commission Chairman Jay Clayton said discussion is occurring on whether it “continues to be appropriate” for U.S.-listed companies from developing markets to be subject to more lax accounting standards than their U.S.-based peers.
In a Tuesday phone interview with financial channel CNBC, Clayton suggested that overseas-based U.S.-listed companies may not be subject to the same rigorous requirements as locally based firms in certain aspects.
He specifically mentioned that U.S.-based companies that list on domestic exchanges must have audit committees led by independent directors, and their outside auditors should be subject to scrutiny by the Public Company Accounting Oversight Board.
What’s the background: Though asked about U.S.-listed Chinese companies specifically, Clayton would only suggest that debate is growing over whether tighter standards should apply to all companies from developing countries that choose to list in the U.S.
The issue has come into focus over the last two months after Chinese coffee chain Luckin admitted in early April to massive accounting fraud in the form of $300 million in fake revenue.
Since then, the U.S. and Chinese securities regulators have launched investigations into Luckin, and on Tuesday the company said it was notified that the Nasdaq planned to delist it from the U.S. exchange.
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