Sen. Rick Scott Calls for Accountability and Transparency of Chinese-Based Companies on U.S. Stock Exchanges

November 13, 2020

WASHINGTON, D.C. – Yesterday, Senator Rick Scott sent a letter urging every Chinese-based company currently listed on major U.S. stock exchanges to comply by the same Public Company Accountability Oversight Board (PCAOB) standards required by U.S. companies. The lack of transparency and accountability by Chinese companies on U.S. exchanges poses a huge risk to American investors.

This letter follows November 12, 2020

To Whom It May Concern:

I write today to express my grave concern that, according to the Public Company Accountability Oversight Board (PCAOB), your company may be failing to meet PCAOB obligations. PCAOB’s mission is to protect the interests of investors through standardized, independent audit reports, and failure to comply is unacceptable.  

I strongly believe that companies that are unwilling to play by the same rules as American companies have no place on American stock exchanges. While the Communist Chinese government has made it extremely difficult for PCAOB to verify the legitimacy of Chinese companies on U.S. exchanges, it remains of critical importance that we protect American investors from potential fraud.

On October 2, 2020, the U.S.-China Economic and Security Review Commission released information that showed there are currently 217 Chinese companies listed on major U.S. stock exchanges. Due to the fact that these companies are not complying with PCAOB obligations, this presents a large scope of risk to the American investor. In order to mitigate that risk, in May 2013, the PCAOB entered into a Memorandum of Understanding (MOU) with the Chinese government, intended to establish a cooperative framework to assist both parties with audit investigations in their respective countries. With the long-term goal of working jointly with China to audit Chinese companies listed on U.S. exchanges, this agreement allowed both parties to request and receive assistance in fulfilling their investigatory obligations.

Instead, in the years following this agreement, the PCAOB has reported that Chinese cooperation has not been sufficient for the PCAOB to carry out its duties, and that consultations with China through the agreed upon mechanism in the MOU have not resulted in any improvements. This has left American investors with no ability to validate the legitimacy of companies like yours, or to confirm that the company data you publish is genuine. In December 2018, the PCAOB and the Securities and Exchange Commission (SEC) released a joint warning to investors outlining the importance of audit quality and transparency – and the challenges that Chinese companies on U.S. exchanges pose to those goals. SEC Chairman Jay Clayton joined his colleagues on the President’s Working Group on Financial Markets to release the Report on Protecting Investors from Significant Risks from Chinese Companies on August 6, 2020, further exploring the risks that noncompliant companies such as yours pose, and making recommendations to the Trump administration that include an eventual de-listing from U.S. exchanges. I fully support the implementation of these recommendations as an adequate first step to addressing this threat, and am working with my colleagues in Congress to provide American regulators with additional enforcement authorities.

The failure by the Communist government of China to allow full transparency from companies like yours puts American investors at risk, and, given the implicit or explicit Communist Party backing of Chinese companies, stands as yet another example of the Chinese government going back on its word and failing to live up to an agreement. I am committed to doing everything I can to hold China accountable and protect American investors from the risks associated with Chinese companies.

I request an explanation as to what efforts you are making to be transparent and assist the PCAOB in performing their duties. If no additional efforts are being made, I request an explanation as to why you believe your company should be given the unique ability to ignore its commitments and impose huge risks on American investors.


Rick Scott

United States Senator