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Federal Register / Vol. 86, No. 234 / Thursday, December 9, 2021 / Rules and Regulations
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the Sarbanes-Oxley Act requires the Commission to identify each covered issuer 6 that has retained a registered public accounting firm 7 to issue an audit report 8 where that registered public accounting firm has a branch or office 9 that:
Is located in a foreign jurisdiction;
and The PCAOB has determined that it is unable to inspect or investigate completely because of a position taken by an authority in the foreign jurisdiction.10
Once identified, Section 104i2B
of the Sarbanes-Oxley Act requires these 6 See Section 104i1A of the Sarbanes-Oxley Act defining a covered issuer as an issuer that is required to file reports under Section 13 15
U.S.C. 78m or Section 15d 15 U.S.C. 78od of the Exchange Act. In this release, we refer to issuers filing Exchange Act reports as registrants.
We use the term issuers when referring to the HFCA Act, but refer to registrants when discussing the forms and form requirements.
7 We use the terms registered public accounting firm and auditor interchangeably to mean public accounting firms that, among other things, prepare accountants reports on U.S. public companies and are required to register with the PCAOB. The term accountants report is defined in 17 CFR 210.1
02a1 Rule 102a1 of Regulation SX, with regard to financial statements, as a document in which an independent public or certified public accountant indicates the scope of the audit or examination that the accountant has made and sets forth that accountants opinion regarding the financial statements taken as a whole, or an assertion to the effect that an overall opinion cannot be expressed.
8 The HFCA Act uses the term audit report. As noted above, see supra note 7, for the purposes of this release and the final amendments, the term audit report has the same meaning as accountants report in Rule 102a1 of Regulation SX.
9 Where a branch or office of an international firm network is a separate legal entity from the U.S.based or international firm network, and that branch or office signs the audit report in its own name, the Commission will look to the PCAOB
determination for that branch or office and not apply that determination to the U.S.-based or other branches or offices of that firm network that are not based in the PCAOB-identified foreign jurisdiction.
10 On September 22, 2021, the PCAOB adopted PCAOB Rule 6100, Board Determinations Under the Holding Foreign Companies Accountable Act, which was approved by the Commission on November 4, 2021. See Public Company Accounting Oversight Board; Order Granting Approval of Proposed Rule Governing Board Determinations Under the Holding Foreign Companies Accountable Act, Release No. 3493527 Nov. 4, 2021 86 FR
62581 Nov. 10, 2021. The PCAOB Rule 6100
establishes a framework for the PCAOB to make its determinations required by the HFCA Act.
Specifically, PCAOB Rule 6100 establishes the manner of the PCAOBs determinations; the factors the PCAOB will evaluate and the documents and information it will consider when assessing whether a determination is warranted; the form, public availability, effective date, and duration of such determinations; and the process by which the PCAOB will reaffirm, modify, or vacate any such determinations. In this release, we refer to a registered public accounting firm that the PCAOB
has determined that it is unable to inspect or investigate completely because of a position taken by an authority in the foreign jurisdiction as a PCAOB-Identified Firm.

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covered issuers, which we refer to as Commission-Identified Issuers in this release, to submit documentation to the Commission establishing that they are not owned or controlled by a governmental entity in that foreign jurisdiction.11 Additionally, Section 3 of the HFCA Act lists additional disclosure requirements for Commission-Identified Issuers that are foreign issuers 12
Commission-Identified Foreign Issuers.
We received a number of comment letters in response to the interim final amendments. While several commenters generally supported them,13 some provided specific suggestions on how to improve them or otherwise implement the HFCA Act,14 and others opposed 15
the interim final amendments.
Generally, commenters supporting the interim final amendments stated that the amendments effectively provided for timely implementation of the HFCA
Act 16 and also informed investors about the level of ownership and control the Chinese Government has in listed companies.17 Additionally, commenters supporting the interim final amendments asserted that they agreed with the objective of the HFCA Act and were concerned about the lack of transparency into Chinese companies.18
11 In addition to this submission requirement, pursuant to Section 104i3 of the Sarbanes-Oxley Act, as added by Section 2 of the HFCA Act, if an issuer is a Commission-Identified Issuer for three consecutive years, the Commission must prohibit the securities of the issuer from being traded on a national securities exchange or through any other method that is within the jurisdiction of the Commission to regulate, including through overthe-counter trading. 15 U.S.C. 7214i3.
12 See 17 CFR 240.3b4 Exchange Act Rule 3b 4. Under Exchange Act Rule 3b4, the term foreign issuer means any issuer that is a foreign government, a national of any foreign country, or a corporation or other organization incorporated or organized under the laws of any foreign country.
13 See letters from American Securities Association May 5, 2021 ASA, Council of Institutional Investors May 5, 2021 CII, U.S.
Chamber of Commerce May 21, 2021 Chamber, United States Senator Dan Sullivan et al. Aug. 9, 2021 Sen. Sullivan et al., and United States Senator John Kennedy Apr. 28, 2021 Sen.
Kennedy.
14 See letters from ICI Global May 5, 2021
ICI, Jessica Kelly Apr. 30, 2021 Kelly, Professor Curtis J. Milhaupt and Professor Lauren Yu-Hsin Lin Apr. 5, 2021 Profs. Milhaupt and Lin, New York Stock Exchange LLC May 12, 2021 NYSE, and Professor Emmanuel T. De George et al. May 4, 2021 U.S. Acctg.
Academics.
15 See letters from Blank Rome LLP May 5, 2021
Blank Rome; China Petroleum & Chemical Corporation Apr. 30, 2021 China Petroleum;
China Southern Airlines Company Limited Apr.
30, 2021 China Southern; Professor Jie et al.
May 3, 2021 Chinese Legal Academics;
Shanshan Xu May 2, 2021 Xu; and Yum China Holdings, Inc. May 4, 2021 Yum.
16 See, e.g., letter from ICI.
17 See, e.g., letter from ASA.
18 See, e.g., letter from Chamber.

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On the other hand, commenters opposing the amendments stated that the amendments were repetitive of disclosure that is already provided and would result in unnecessary compliance costs,19 were unfair to Chinese registrants,20 may bring adverse effects to the interests of global investors in Commission-Identified Issuers,21 and did not account for regulations in other jurisdictions.22 Some of these commenters also argued that any conflicts of relevant laws in different jurisdictions that inhibit PCAOB
inspection should be resolved through the cooperation of regulators from the different jurisdictions.23 Many of these comments reflect general opposition to the design and operation of the HFCA
Act itself. Where commenters addressed aspects of the statute that Congress left to the Commission to implement, we have responded to those comments below, in our discussion of the final amendments.
II. Discussion of Amendments A. Documentation Submission Requirements 1. Interim Final Amendments As discussed above, Section 2 of the HFCA Act amended Section 104i2 of the Sarbanes-Oxley Act to require any Commission-Identified Issuer to submit to the Commission documentation establishing that the issuer is not owned or controlled by a governmental entity in the relevant foreign jurisdiction.24
The Commission amended Form 10K, Form 20F, Form 40F, and Form N
CSR to implement this provision. The submission requirement applies to all Commission-Identified Issuers. The interim final amendments required this documentation to be submitted electronically to the Commission on a supplemental basis 25 through the Electronic Data Gathering, Analysis, and Retrieval EDGAR system on or 19 See
letter from China Petroleum.
letters from Chinese Legal Academics and China Petroleum.
21 See letters from Blank Rome, Chinese Legal Academics, China Southern, and Yum.
22 See letters from China Southern and Xu.
23 See letters from Blank Rome, Chinese Legal Academics, China Southern, China Petroleum, and Xu.
24 See Section 104i2A of the Sarbanes-Oxley Act. The interim final amendments met the Section 104i4 of the Sarbanes-Oxley Act mandate that the Commission adopt rules establishing the manner and form in which such submissions will be made no later than 90 days after enactment.
25 For purposes of the interim final amendments, use of the term supplemental did not have the meaning of supplemental information in 17 CFR
240.12b4. This is true for the final amendments we are adopting in this release as well.
20 See
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