Jul. 07, 2020
Dear Sirs: I am writing to add my voice to the crowd calling for emerging market companies who do not submit to all normal oversight requirement be delisted. It is unreasonable and indeed outrageous that US capital markets allow overseas companies which cannot be checked or investigated to be given a “pass” in terms oversight that allows these firms to inflate revenues, profits, or assets. This in effect induces more funds to go to overseas companies with spurious management and less to US companies subject to greater oversight and the full force of regulatory penalties. Our political leaders have railed against “unfair trade” for years, but this unfair playing field is of our own making. It is within our power to correct it. Foreign companies coming to US capital markets should be ready and willing not only to comply to the same rules, but go above and beyond and be subject to additional scrutiny and compliance (e.g. periodic inspections by the SEC, ineligibility for reduced disclosure under the JOBS act, mandating a frequent changes of auditors, escrow a % of funds raised for fines and penalties, etc.) since their physical distance and foreign jurisdiction makes their operations more complex for potential investors to check out and conduct due diligence. In this way, faith in the capital markets be maintained. This forum is nominally called “emerging markets” but the predominant offenders are Chinese companies as they are shielded from oversight and protected against investigation with the assistance of their government. It would be beneficial to identify the problem by name. Since the PRC prohibits financial oversight including cooperation with investigations by the PCAOB or other regulators responsible for safeguarding the integrity of the capital markets, companies from China who do not expressly state that they will forgo such protections, should be banned from new listings; furthermore, current listed companies should be given a small window (~30 days) to agree in writing to full compliance or be delisted. If the Chinese govt is not willing to cooperate, all such companies whose core operations are in China (regardless of whether they are nominally domiciled in the Caymans, BVI, etc and/or operate under a VIE agreement) should be removed from the US exchanges. Thank you, Jon Raiti