Foreign and Military Affairs

China, US to close stock regulation loopholes

(Xinhua)
Updated: 2011-06-28 18:59

Sealing the crackes

Under the din of the crash, however, lies a deeper problem with the market. Investors based in both China and the US believe that the market's overall credit has suffered most from the regulatory loopholes.

According to the PCAOB, out of the more than 600 companies that were given access to US exchanges through reverse mergers between January 2007 and March 2010, 159 were from China.

Brennan said the US has sent a joint delegation from the SEC (Security and Exchange Commission) and the PCAOB to Beijing to discuss the inspection process and cross-border auditing oversight system for US-listed Chinese companies.

"We have been trying to work through the concerns of Chinese authorities, as we have worked through similar concerns with authorities in other countries," Brennan said.

The PCAOB recently completed similar negotiations with Switzerland and the United Kingdom.

"In these and other jurisdictions, the PCAOB has been able to successfully resolve issues pertaining to local law, sovereignty, and jurisdiction," Brennan said.

According to the PCAOB, the recent agreements that it has entered into with the United Kingdom and Switzerland are not agreements based on mutual recognition, but are instead arrangements for cooperative joint inspections that have enabled PCAOB inspectors to evaluate auditing work being done in these countries.

"We are expecting to establish a meaningful inspection arrangement for Chinese auditing firms by the end of the year," Brennan said.

A CSRC official who requested anonymity told Xinhua that a definitive agreement on auditing oversight will be made between the two countries.

"We are working together to solve the issue. The agreement will probably be made in the near future," said the official.