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Countdown Starts on Chinese Company Delistings


Should any company be allowed to be listed on a U.S. stock exchange if their auditors are not properly regulated by the PCAOB? The SEC has started a countdown that will force many Chinese companies to leave the American stock exchanges.


This all started with Sino-Forest. In 2011, the company was accused of fraud and found itself under investigation by the Royal Canadian Mounted Police, Ontario Securities Commission, and the SEC. It all started with an investment advisory report published by Muddy Waters LLC.


Accounting firm Ernst & Young LLP has been accused by regulators of failing to properly scrutinize the books of failed forestry company Sino-Forest Corp., marking a rare case of auditors facing allegations of wrongdoing by the Ontario Securities Commission.


So now, ten years later, the SEC is finally taking action to make everyone follow the same rules. This action will accelerate the decoupling of the world’s two largest economies and affect investors that own securities in more than 200 U.S.-listed Chinese companies with a combined market value of roughly $2 trillion.

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