"This reflects the consistent openness of Chinese regulators to cross-border audit and regulatory cooperation and is in line with relevant international practices," the CSRC said.
(Image credit: CnEVPost)
In late January, it was reported that Chinese securities regulator could provide a "positive surprise" on the issue of audit papers for companies listed in the United States. That appears to have come.
The China Securities Regulatory Commission (CSRC) today issued an announcement that it will revise its regulations on confidentiality and file management for Chinese companies listed abroad, originally issued in 2009, and will seek public comment on the new text. The public has until April 17 to provide feedback.
Most notably, the new regulations will remove the following statement from the previous version:
On-site inspections shall be conducted primarily by Chinese regulators or rely on the results of inspections by Chinese regulators.
When overseas securities regulators and supervisory authorities conduct investigations of locally listed Chinese companies, they should do so through cross-border regulatory cooperation mechanisms, and the CSRC or Chinese regulators will provide the necessary assistance based on bilateral and multilateral cooperation mechanisms, the CSRC said.
The CSRC will provide institutional safeguards for the safe and efficient conduct of cross-border regulatory cooperation, including joint inspections, it said.
The language may not look very understandable, but it seems to imply that the CSRC is prepared to allow US regulators to see audit paper when investigating locally listed Chinese companies, breaking a more than decade-long stalemate on the issue.
On January 28, Reuters reported that Fang Xinghai, the vice-chairman of the CSRC, told Western banking executives that China and the US were making progress in coordinating regulations governing Chinese companies listed in New York and could see a "positive surprise" by June or earlier.
On April 1, Bloomberg reported that Chinese authorities are preparing to give US regulators full access to the audit papers of more than 200 companies listed in New York as soon as midyear, making a rare concession to prevent further decoupling between the US and China.
The CSRC and other state regulators are drafting a framework that would allow most Chinese companies to retain their listing status, the report said, citing people familiar with the matter.
Judging from the CSRC's releases today, the new rules appear to be the new framework mentioned in the Bloomberg report.
The revision will provide clearer guidance on confidentiality and file management related to overseas listings, the CSRC said in a question-and-answer session today, adding that the rules, which were put in place in 2009, are increasingly out of step with the new situation.
The amendment will help Chinese regulators and overseas regulators safely and efficiently carry out cross-border regulatory cooperation activities, including joint inspections, to safeguard the rights and interests of global investors, according to the Q&A.
The CSRC firmly supports companies to choose their own listing locations according to their own wishes, and the deletion of the statement that "on-site inspections shall be conducted primarily by Chinese regulators or rely on the results of inspections by Chinese regulators" is based on the international practice of cross-border audit and regulatory cooperation, it said.
"This reflects the consistent openness of Chinese regulators to cross-border audit and regulatory cooperation and is in line with relevant international practices, and will provide institutional safeguards for the safe and efficient conduct of cross-border regulatory cooperation, including joint inspections," the CSRC said.
In practice, it should be rare for companies to provide documents and information containing confidential or sensitive information to relevant securities companies and securities service providers, the CSRC said.
If the provision is necessary for audit work, the new rules reiterate that companies must fulfill the necessary approval or filing procedures in accordance with relevant laws and regulations, but will not impose excessive compliance costs on companies, the CSRC said.