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Federal Register / Vol. 86, No. 234 / Thursday, December 9, 2021 / Rules and Regulations
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The percentage of the shares of the issuer owned by governmental entities in the foreign jurisdiction in which the issuer is incorporated or otherwise organized;
Whether governmental entities in the applicable foreign jurisdiction with respect to that registered public accounting firm have a controlling financial interest with respect to the issuer;
The name of each official of the Chinese Communist Party CCP who is a member of the board of directors of the issuer or the operating entity with respect to the issuer; and Whether the articles of incorporation of the issuer or equivalent organizing document contains any charter of the CCP, including the text of any such charter.
Although Section 3 of the HFCA Act does not mandate specific rule or form changes, the Commission stated its belief in the Interim Final Release that amending Commission forms to include the new disclosure requirements will help registrants comply with the HFCA
Act. The Commission therefore amended Form 10K, Form 20F, Form 40F,32 and Form NCSR 33 to reflect the disclosure requirements in Section 3
of the HFCA Act.
The interim final amendments required a registrant to provide the disclosure for each year in which the registrant is a Commission-Identified Foreign Issuer. Because the period covered by the forms looks back at the prior year, a Commission-Identified Foreign Issuer that was identified in the prior year would have been required to registered public accounting firm that the PCAOB
was unable to inspect or investigate completely, because of a position taken by an authority in the foreign jurisdiction, issued an audit report for the registrant. For the same reasons, the final amendments include the same terms used in the interim final amendments for clarification as well.
32 As we noted in the Interim Final Release, in reviewing the Commissions forms, we determined that Form 40F is an equivalent or substantially similar form filed by foreign issuers. The Form 40F is a form that may be used by Canadian issuers that seek to offer their securities in the United States and is used by those issuers for annual reports filed under Section 13a or Section 15d of the Exchange Act. As such, even though the form is not expressly named in the HFCA Act, its use by issuers for annual reports filed under Section 13a and Section 15d establishes the form as equivalent or substantially similar to the Form 10K and Form 20F.
33 Form NCSR is an annual reporting form used by registered investment companies that are affected by the HFCA Act to file their audited financial statements with the Commission.
Although Form NCSR is not specifically identified in the HFCA Act, as we indicated in the Interim Final Release, its use by these registered investment companies for annual reports filed under Section 13a and Section 15d establishes the form as equivalent or substantially similar to the Form 10K and Form 20F.

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provide the HFCA Act Section 3
disclosure in its annual report for the year in which it was identified, even if the registrants subsequent filing includes an audit report issued by a registered public accounting firm that is a not a PCAOB Identified Firm nonPCAOB Identified Firm.
In addition, the interim final amendments added an instruction in each of Form 20F and Form 40F to specify that the disclosure applies to annual reports, and not to registration statements.34
2. Comments Commenters in one letter stated that registrants typically are not providing the detailed disclosures required by the HFCA Act and that current risk factor disclosure tends to be insufficient for investors to understand the consequences of non-inspection.35
Other commenters in a separate letter recommended that the disclosure requirement relating to identification of officials of the CCP that are members of the board of directors is vague and may be unhelpful because the concept of official of the CCP is susceptible to variation.36 The commenter stated that virtually all executives of Chinese stateowned enterprises are members of the CCP as are many executives of private firms. This commenter further stated that very little information about the degree of control exercised by the Chinese Government and CCP over a registrant can be gleaned solely from disclosure of a reference to the CCP
charter in the companys articles of incorporation.
The commenter recommended requiring disclosure of each board members current and past positions and ranks within the Chinese Government or CCP and whether the board member serves on the registrants internal Communist Party Committee suggesting such disclosure would provide material information about an individuals links to the Chinese partystate and, by extension, the degree of influence the party-state exerts over the company. Additionally, the commenter recommended disclosure of all provisions in a registrants articles of incorporation that reference the CCP or the companys internal Communist Party Committee.
34 While Form 20F and Form 40F may be used as an initial registration form, the Commission noted its belief in the Interim Final Release that, in the context of Section 3 of the HFCA Act, which linked the Form 20F requirement to the Form 10K requirement, the disclosure was intended to be required when the form is used as an annual report.
35 See letter from U.S. Acctg. Academics.
36 See letter from Profs. Milhaupt and Lin.

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This commenter stated that since many companies with Chinese operations are listed in the United States using variable interest entity VIE structures incorporated in jurisdictions outside of China, the disclosure requirements could be read as not requiring disclosure of Chinese Government ownership of shares of the registrant. The commenter recommended that the amendments clarify that Commission-Identified Foreign Issuers are required to disclose the percentage of shares of the registrant owned by governmental entities in the foreign jurisdiction in which the registrant is incorporated or otherwise organized, or in which the registrants operating entity is incorporated.
Another commenter recommended that the Commission consider whether risks are heightened for registrants using a VIE structure, given that the structure could block meaningful disclosure of financial and political information.37 A
different commenter also noted concerns with VIE and dual-class structures, which are complex and involve risks that the commenter believes are not fully understood by many market participants.38 This commenter recommended additional disclosure guidance for VIE and dualclass stock structures for investors to more fully understand the ownership or control of those registrants subject to the HFCA Act.
Moreover, one commenter suggested that we consider distinguishing registrants that list exclusively on a U.S.
exchange from those that have a secondary listing overseas, noting the Commissions assessment in the Interim Final Release that 79 percent of registrants covered by the HFCA Act disclose listing only on a U.S. national exchange.39 Another commenter suggested vigilance relating to firms that switch between U.S. and foreign jurisdictions to reset the clock or switch to auditors operating only nominally in the United States.40
3. Final Amendments We are finalizing the disclosure requirements for Commission-Identified Foreign Issuers with a minor modification to the interim final amendments. As with the interim final amendments, we are adopting amendments to Form 10K to revise Part II, Item 9C, Form 20F to revise Part II, Item 16I, Form 40F to revise 37 See
letter from Kelly.
letter from CII.
39 See letter from Kelly citing Interim Final Release, supra note 3, at 17538, n. 54.
40 See letter from U.S. Acctg. Academics.
38 See
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