The Holding Foreign Companies Accountable (HFCA) Act: A Critique

The Holding Foreign Companies Accountable (HFCA) Act: A Critique

Jesse Fried, Tamar Groswald Ozery

Series number :

Serial Number: 
721/2023

Date posted :

July 18 2023

Last revised :

July 18 2023
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Keywords

  • China • 
  • Cross-listing • 
  • Holding Foreign Companies Accountable Act • 
  • Corporate governance

The 2020 Holding Foreign Companies Accountable (HFCA) Act will force China-based firms to delist from U.S. exchanges if China fails to permit audit inspections during a two-year period. The Act also requires such firms, as soon as China blocks such inspections, to disclose ties to the Chinese party-state. We first explain why the delisting provisions, while well-intentioned, may well harm U.S.

investors. We then turn to the disclosure provisions, explaining that they appear to be motivated by a desire to name-shame Chinese firms rather than to protect investors. While China-based firms do pose unique risks to U.S. investors, the Act fails to mitigate—and may well exacerbate—these risks.

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Authors

Real name:
Tamar Groswald Ozery