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

Luckin Coffee

05/06/2020 04:00

(Updates headline)
    By Humeyra Pamuk
    WASHINGTON, June 4 (Reuters) - U.S. Secretary of State Mike
Pompeo on Thursday warned American investors against fraudulent
accounting practices at 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.
    President Donald Trump issued a memorandum on Thursday
calling for recommendations to be issued within 60 days to
protect U.S. investors from what he said was China's failure to
allow audits of U.S.-listed Chinese companies.
    "We must take firm, orderly action to end the Chinese
practice of flouting American transparency requirements without
negatively affecting American investors and financial markets,"
Trump wrote.
    The statements mark the latest flashpoint in U.S.-China
relations at a time of escalating tensions between the world's
two largest economies over trade, the coronavirus pandemic and
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 his 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 added.
    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
    Nasdaq Chief Executive Adena Friedman said on Thursday
addressing the overseas accounting issues is a matter for the
U.S. Securities and Exchange Commission (SEC).  urn:newsml:reuters.com:*:nL1N2DH18P
    The exchange's 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
    Trump said last week 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.
    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 SEC has been locked in a decade-long struggle with the
Chinese government to inspect audits of U.S.-listed Chinese
companies.
    In April, SEC chief Jay Clayton, warned investors against
putting money into Chinese companies due to problems with
disclosures.  urn:newsml:reuters.com:*:nL1N2DB23E
    A senior U.S. official said he hoped the SEC would review a
memorandum of understanding signed with China in 2013, allowing
Chinese companies to withhold information if their local laws
forbid them from sharing it.
    "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, Nick
Zieminski and Tom Brown)
 ((humeyra.pamuk@thomsonreuters.com; +1 202 3105694; Reuters
Messaging: Twitter: @humeyra_pamuk))