Shearman & Sterling LLP
Issue link: https://digital.shearman.com/i/1466792
5 Civil rights groups and university scientists in the US, who have complained the program used racial profiling, praised the DOJ's announcement. Though officially terminated, the Department of Justice said it would continue to combat Chinese espionage and cyberthreats but would change its approach to similar "false statement" cases. In particular, Assistant Attorney General Matthew Olsen announced the initiative will now be called "a strategy for countering nation-state threats," signaling that the US will focus on foreign government threats more generally. Six Chinese Companies Identified for Possible Delisting from US Stock Exchanges Last quarter we reported on the SEC's adoption of a final rule to implement the Holding Foreign Companies Accountable Act (HFCAA), legislation passed in 2020 which requires companies to declare whether they are owned by a foreign government and enables the SEC to prohibit the trading of the US-listed securities of foreign companies if the company does not submit to an audit by the Public Company Accounting Oversight Board. If a foreign company fails to comply with the rule for three consecutive years, the HFCAA requires the SEC to issue an order prohibiting the trading of the company's securities on US stock exchanges and in the US over-the- counter markets. On March 8, the SEC published its first provisional list of HFCAA-identified issuers, notifying these issuers of their HFCAA non-compliance. The six companies, all based in China, are: • Chinese biotech firms BeiGene and Zai Lab • Restaurant operators, Yum China • Semiconductor process equipment manufacturer, ACM Research • Pharmaceutical company, HUTCHMED • Social media company Weibo. The identified companies will not be immediately delisted, since the HFCAA requires an issuer to be in non- compliance with its audit requirement for three years in a row, meaning that the SEC may not take final action until 2024 at the earliest. Chinese regulators responded to the announcement by opposing what it deemed a politicized use of securities supervision by US authorities. Nevertheless, the PRC regulators signaled that they are open to working with US regulators to resolve these issues through a cooperation plan.