- The stock price of Li Auto Inc (NASDAQ: LI) fell by over 3% today. This is why it happened.
The stock price of Li Auto Inc (NASDAQ: LI) fell by over 3% today. Investors appear to be responding negatively to a change with the SEC regulations.
According to CNBC, the Securities and Exchange Commission adopted amendments to finalize rules to implement the Holding Foreign Companies Accountable Act (HFCAA) today. This law was passed last year after Chinese regulators denied requests from the Public Company Accounting Oversight Board (PCAOB) — which was created in 2002 to oversee public company audits — and to inspect the audits of Chinese firms that list and trade within the U.S.
Calls for actions around this regulation were accelerated after Chinese coffee company Luckin Coffee fired its CEO and chief operating officer following an internal fraud probe.
With this law, the SEC can ban companies from trading on exchanges if the PCAOB is not able to audit requested reports for 3 consecutive years. Plus it also requires companies to declare whether they are owned or controlled by any foreign governments.
“We have a basic bargain in our securities regime, which came out of Congress on a bipartisan basis under the Sarbanes-Oxley Act of 2002. If you want to issue public securities in the U.S., the firms that audit your books have to be subject to inspection by the PCAOB,” SEC Chair Gary Gensler in a statement.
Gensler pointed out that over 50 foreign jurisdictions have worked with the PCAOB to allow inspections. But “two historically have not: China and Hong Kong.”
A number of China-based tech stocks fell as a result of the changes in the SEC rules today
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