Holding Foreign Companies Accountable Act Becomes Law

On December 18, 2020, the Holding Foreign Companies Accountable Act (the “HFCAA”) was signed into law and the Securities and Exchange Commission (the “SEC”) was advised to adjust its rule proposal to take into account the new legislation. Under the legislation, a reporting company that uses an auditor in a jurisdiction that restricts or controls the Public Company Accounting Oversight Board’s oversight of the audit firm must disclose ties to foreign government entities, and the SEC must prohibit trading in its securities if it determines that the company has had three “non-inspection years”. Precisely what form the SEC rules will take is yet unknown as Chairman Clayton has resigned and a new presidential administration will soon be in place. It is expected, though, that there will be rulemaking under the HFCAA.