The US Securities and Exchange Commission (SEC) has recently finalized the Holding Foreign Companies Accountable Act (HFCAA). This development carries implications for financial technology companies, particularly those with significant foreign operations.
The Act now requires companies to provide documentation, proving they are not owned or controlled by a foreign government. This crucial step is designed to promote fair competition and limit foreign influence in the market.
In addition, the Act requires firms to allow the Public Company Accounting Oversight Board (PCAOB) to inspect their audit reports. This action emphasizes transparency and accountability. Furthermore, companies face the risk of being delisted from US exchanges if they fail to comply for three consecutive years.
Impact on British Fintech Companies
British fintech companies operating in the US or planning to expand there need to be aware of these changes. Grasping the potential impact on their operations and understanding the steps needed to comply with the new rules is vital.
Firstly, companies must provide proof of their independence from foreign government entities. This requirement might necessitate a thorough review of shareholding structures and potential foreign government ties. Indeed, this task requires careful preparation and potentially significant resources for full compliance.
Secondly, the requirement for PCAOB inspections might necessitate changes in companies’ auditing processes. Companies may need to ensure their audit reports are fully transparent and can withstand PCAOB scrutiny. This could mean investing in robust auditing systems and processes, and possibly hiring additional staff.
Lastly, the risk of being delisted from US exchanges for non-compliance is substantial. Hence, it’s essential for these companies to comply with the HFCAA requirements. The SEC’s implementation of these rules signifies a major shift in the regulatory landscape. As a result, British fintech companies need to closely track these changes and take necessary steps to maintain their operations in the US market.
