In response to President Trump's June 4 Memorandum on Protecting United States Investors from Significant Risks from Chinese Companies, the President's Working Group on Financial Markets (PWG) today released a report making five recommendations. These recommendations are designed to address risks to investors in U.S. financial markets posed by the Chinese government's failure to allow audit firms that are registered with the Public Company Accounting Oversight Board (PCAOB) to comply with U.S. securities laws and investor protection requirements.

'The PWG examined the risks to investors posed by the Chinese government's failure to allow access. The PWG unanimously recommends that the Securities and Exchange Commission take steps to enhance the listing standards on U.S. exchanges for access to audit work papers, among other recommendations,' said Secretary Steven T. Mnuchin, Chairman of the PWG. 'The recommendations outlined in the report will increase investor protection and level the playing field for all companies listed on U.S. exchanges. The United States is the premier jurisdiction in the world for raising capital, and we will not compromise on the core principles that underpin investor confidence in our capital markets.'

The PWG recommends that the SEC take steps to implement the five recommendations outlined in the report. In particular, to address companies from jurisdictions, such as China, that do not provide the PCAOB with sufficient access to fulfill its statutory mandate ('Non-Cooperating Jurisdictions,' or 'NCJs'), the PWG recommends enhanced listing standards on U.S. exchanges. This would require, as a condition to initial and continued exchange listing, PCAOB access to work papers of the principal audit firm for the audit of the listed company. Companies unable to satisfy this standard as a result of governmental restrictions on access to audit work papers and practices in NCJs may satisfy this standard by providing a co-audit from an audit firm with comparable resources and experience where the PCAOB determines it has sufficient access to audit work papers and practices to conduct an appropriate inspection of the co-audit firm. To reduce market disruption, the new listing standards could provide for a transition period until January 1, 2022 for currently listed companies.