The U.S. Securities and Exchange Commission has issued amendments to implement the Holding Foreign Companies Accountable Act.

2024-09-27 01:11:25

The U.S. Securities and Exchange Commission ("SEC") has released interim final amendments ("Amendments") to Forms 20-F, 40-F, 10-K, and NCSR to implement the disclosure and filing requirements of the Holding Foreign Companies Accountable Act ("HFCAA"). The HFCAA was signed into law on December 18, 2020. The Act amends Section 104 of the Sarbanes-Oxley Act of 2002, imposing specific requirements on public companies that are considered "covered issuers" by the SEC and have engaged an accounting firm for audit reports, if the firm has branches or offices outside the United States and the Public Company Accounting Oversight Board ("PCAOB") is unable to thoroughly inspect or investigate due to the stance of a foreign government.

The Amendments require:

• A "covered issuer" identified by the SEC, if not owned or controlled by a governmental entity of a specific country, to submit supplementary documents electronically to the SEC to prove that the issuer is not owned or controlled by a governmental entity in that country;

• A "covered issuer" identified by the SEC to disclose additional information, such as:

• During the last fiscal year, the accounting firm has issued an audit report for the issuer;

• The proportion of the issuer's shares held by foreign governmental organizations in the issuer's place of registration or incorporation;

• Whether the governmental organization of the country where the accounting firm is located has a controlling financial interest in the issuer;

• The names of members of the Communist Party of China ("CPC") on the board of directors of the issuer or its operating entities; and

• Whether the issuer's organizational documents contain the text of the CPC constitution.

Securities issuers are only required to comply with the filing or disclosure requirements after the SEC identifies them as "covered issuers."

The Amendments will become effective 30 days after publication in the Federal Register, and the deadline for submitting comments on the Amendments will be on the same day.