The SEC has started enforcing a new law that could kick some Chinese companies off US exchanges

• The SEC on Wednesday announced a law that will compel foreign companies to comply with US laws or risk being kicked off stock exchanges.
• This puts some Chinese companies that have long rejected US officials to audit them at risk of being delisted.
• The Holding Foreign Companies Accountable Act became law on December 18, 2020, under the Trump administration.
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The Securities and Exchange Commission on Wednesday announced that it is in the final steps of implementing a law that will compel foreign companies to allow US regulators to review their financial audits, putting some Chinese companies that have long rejected US officials to audit them at risk of being delisted.

In a statement published by the agency on Wednesday, the SEC said non-compliance for three consecutive years will get companies kicked off from the New York Stock Exchange or Nasdaq.

The Holding Foreign Companies Accountable Act became law on December 18, 2020, towards the tail end of the Trump administration. But with Joe Biden now in power, the implementation indicates a continuation of the country's rigid stance towards China as tensions continue to simmer between the global superpowers.

The law essentially requires companies to submit documentation proving they are not owned or controlled by a governmental entity. Those the agency identifies as foreign issuers must submit additional disclosure requirements such as naming members of the board who affiliated with the Chinese Communist Party, among others.

China, in the past, has been known to refuse to let the U.S. Public Company Accounting Oversight Board look into audits of firms that trade in the US, often citing national security concerns. Among the notable listed firms not complying with the audit inspection are Jack Ma's Alibaba Group and internet giant Baidu.

The interim final amendments become effective 30 days after publication. The commission plans to separately address the implementation of the trading prohibitions.