Pompeo calls Nasdaq's strict rules a model to guard against fraudulent Chinese companies (updated)

Luckin Coffee

04/06/2020 22:15

(Updates with Pompeo statement)
    By Humeyra Pamuk
    WASHINGTON, June 4 (Reuters) - U.S. Secretary of State Mike
Pompeo on Thursday warned American investors against
'fraudulent' accounting practices of China-based companies and
said the Nasdaq's recent decision to tighten listing rules for
such players should be a model for all other exchanges around
the world.
    His remarks on the issue, reported first by Reuters before
being delivered via a statement, illustrate the Trump
administration's desire to make it harder for some Chinese
companies to trade on exchanges outside of China.
    It also represents the latest flashpoint in the relationship
between Washington and Beijing at a time of escalating tensions
between the world's two largest economies over trade, the
coronavirus pandemic as well as a spat over Hong Kong.
    "American investors should not be subjected to hidden and
undue risks associated with companies that do not abide by the
same rules as U.S. firms," Pompeo said in a statement. "Nasdaq’s
action should serve as a model for other exchanges in the United
States, and around the world."
    "I applaud Nasdaq for requiring auditing firms to ensure all
listed companies comply with international reporting and
inspection standards," Pompeo said.
    Nasdaq Inc  NDAQ.O  took action last month and tightened
listing rules, in a bid to curb initial public offerings of
Chinese companies closely held by insiders and with opaque
accounting.  urn:newsml:reuters.com:*:nL1N2D100Y
    The exchange declined to comment on Thursday. Its tightening
of listing standards came after Chinese coffeehouse chain Luckin
Coffee Inc  LK.O , which had a U.S. IPO in early 2019, announced
that an internal investigation showed its chief operating
officer and other employees fabricated sales deals.  urn:newsml:reuters.com:*:nL4N2CU3FK
    President Donald Trump on Friday said his administration
would begin the process of eliminating special U.S. treatment
for Hong Kong to punish China, saying Beijing's move to impose
new national security legislation meant the territory no longer
warranted U.S. economic privileges.  urn:newsml:reuters.com:*:nL4N2DB0H6
    He also said he was instructing a presidential working group
to study the differing practices of Chinese companies listed on
the U.S. financial markets, with the goal of protecting American
investors.
    "The real issue is the lack of transparency and the lack of
disclosure to the American investors," Keith Krach,
undersecretary for economic growth, energy and the environment
at the U.S. State Department, told Reuters on Wednesday.
    "No country should be allowed to lie to the American
investors to create an unfair advantage, especially when
operating in American markets," Krach said, adding that there
was a push within the administration to make U.S. investors more
aware about China's opaque accounting practices.
    As a result of the U.S. pressure, many U.S.-listed Chinese
firms will likely list on the Hong Kong exchange this year in
part because of U.S. political pressure, the head of the
exchange said Thursday. urn:newsml:reuters.com:*:nL1N2DH0VB
    The U.S. Securities and Exchange Commission (SEC) has been
locked in a decade-long struggle with the Chinese government to
inspect audits of U.S.-listed Chinese companies. The regulator’s
accounting oversight arm, the Public Company Accounting
Oversight Board (PCAOB), is still unable to access those
critical records, it has said.
    In April, the head of the SEC, Jay Clayton, warned investors
against putting money into Chinese companies due to ongoing
problems with those companies’ disclosures.  urn:newsml:reuters.com:*:nL1N2DB23E
    A senior U.S. official said he hoped the SEC would review a
2013 memorandum of understanding signed with China to allow
Chinese companies to not share information if their local laws
forbid them from doing so.
    "That waiver should probably be reviewed at this point in
time as to whether it is still appropriate and if not be
rescinded," he said, adding that the decision was up to the SEC.
   

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Nasdaq to tighten listing rules, restricting Chinese IPOs
-sources     urn:newsml:reuters.com:*:nL1N2D100Y
HKEX says many U.S.-listed Chinese firms plan Hong Kong listings
    urn:newsml:reuters.com:*:nL1N2DH0VB
Luckin Coffee sacks CEO, COO for alleged fraud     urn:newsml:reuters.com:*:nL4N2CU3FK
In broadside against China, Trump moves toward ending Hong Kong
privileges     urn:newsml:reuters.com:*:nL4N2DB0H6
Trump administration to study ways to protect for U.S. investors
from Chinese firms      urn:newsml:reuters.com:*:nL1N2DB23E
U.S. securities regulator warns investors over Chinese company
disclosures      urn:newsml:reuters.com:*:nL2N2CA0HM
Trump pressed to halt federal pension investments in China's
ZTE, Hikvision     urn:newsml:reuters.com:*:nL1N2C9099
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Reporting by Humeyra Pamuk; additional reporting by Echo Wang
and John McCrank; Editing by Chris Sanders, Edward Tobin and
Nick Zieminski)
 ((humeyra.pamuk@thomsonreuters.com; +1 202 3105694; Reuters
Messaging: Twitter: @humeyra_pamuk))