In December 2022, Congress amended the Holding Foreign Companies Accountable Act (“HFCAA”) to shorten the timeframe before certain issuers face a trading prohibition from three to two consecutive years, and to clarify that any foreign authority impeding Public Company Accounting Oversight Board (“PCAOB”) inspections or investigations can trigger the provisions of the Act.
The HFCAA requires that, every year, the SEC identify any public companies (“Commission-Identified Issuers” or “CIIs”) that file annual reports with financial statements audited by an auditor located in a foreign jurisdiction where the PCAOB has determined it is unable to inspect or investigate completely because of a position taken by a foreign authority (a “PCAOB-identified jurisdiction”). Under the amended HFCAA, once a company is identified as a CII for two consecutive years, the Commission must apply certain trading prohibitions to that CII’s securities.
In addition, all CIIs are listed on the SEC website at www.sec.gov/HFCAA, and each CII must provide certain disclosures to investors and the Commission for each year it is identified as a CII. For foreign issuers that are CIIs, the required disclosures include the percentage of shares owned by foreign government entities, whether government entities in the foreign jurisdiction control the issuer, identification of all Chinese Communist Party (“CCP”) officials who are on the board of the issuer or the operating entity for the issuer, and whether the issuer’s articles of incorporation contain any “charter” of the CCP.
Shortened Timeline before Trading Prohibition
As initially enacted, the HFCAA required the Commission to prohibit trading in the securities of an issuer if it is a CII for three consecutive years. On December 29, 2022, Congress took action to shorten the timeframe before the Commission must impose an initial trading prohibition on a CII’s securities to two consecutive years. In the December 2021 adopting release for the Commission’s final rules implementing the HFCAA, the Commission stated that issuers that are CIIs for the period specified in the HFCAA are subject to an initial trading prohibition. Accordingly, the shorter, consecutive two-year period will apply to trigger the trading prohibition.
Updated PCAOB Determination and Ongoing Issuer Obligations
As of the date of this statement, there are no “PCAOB-identified jurisdictions.” Therefore, there are no issuers currently at risk of having their securities subject to an initial trading prohibition under the HFCAA. This will remain the case unless and until the PCAOB issues a new determination.
The PCAOB has, however, previously identified jurisdictions pursuant to its Rule 6100 leading to 174 issuers becoming conclusively identified CIIs, as listed on the Commission’s website. Those CIIs must comply with the HFCAA and Commission rules for submission and disclosure requirements for the year in which they are identified. Those CIIs will continue to be included on the Commission’s website and Division of Corporation Finance staff will review the relevant filings for compliance with these submission and disclosure requirements.
Additionally, we note that the PCAOB could, in the future, make a new determination that it is unable to inspect or investigate completely registered public accounting firms in one or more jurisdictions because of positions taken by a foreign authority. At that time, Commission staff would continue to follow the procedures described in the December 2021 adopting release to identify issuers as CIIs. As noted above, should any issuers be identified as CIIs for two consecutive years in the future, an initial trading prohibition on the issuer’s securities would be imposed. Staff will continue to monitor developments related to the HFCAA, including any changes in PCAOB determinations related to inspections and investigations.
Other Disclosure Obligations for China-based Issuers
In July 2021, Chair Gensler issued a Statement on Investor Protection Related to Recent Developments in China.  In that regard, we highlight that China-based issuers should consider their disclosure obligations as a whole, in addition to those disclosures required by the HFCAA and related Commission rules. To that end, we remind issuers that the Division of Corporation Finance has issued a Sample Letter to China-Based Companies, as well as earlier disclosure guidance to China-based issuers. The Division of Corporation Finance will monitor disclosures by China-based issuers and may provide additional guidance to assist these issuers in meeting their disclosure obligations under the federal securities laws.
 This statement and the other staff statements referenced herein represent the views of the staff of the Division of Corporation Finance and the Division of Trading and Markets. They are not rules, regulations, or statements of the Securities and Exchange Commission (“Commission”). The Commission has neither approved nor disapproved their content. Staff statements have no legal force or effect: they do not alter or amend applicable law, and they create no new or additional obligations for any person. References herein to the “Securities Act” refer to the Securities Act of 1933 and references to the “Exchange Act” refer to the Securities Exchange Act of 1934.
 The SEC “provisionally” identifies a registrant as a Commission-Identified Issuer on the SEC’s website at www.sec.gov/HFCAA. For 15 business days after this provisional identification, a registrant may email the SEC if it believes it has been incorrectly identified, providing evidence supporting its claim. After reviewing the information, the registrant will be notified whether the SEC will “conclusively identify” the registrant as a Commission-Identified Issuer.
 Pursuant to the Consolidated Appropriations Act, 2023, the determination can be based on the positions of any foreign authority, not only an authority in the location in which the firms are headquartered or in which they have a branch or office.
 Division of Corporation Finance, CF Disclosure Guidance: Topic No. 10 Disclosure Considerations for China-Based Issuers (Nov. 23, 2020) available at https://www.sec.gov/corpfin/disclosure-considerations-china-based-issuers (including disclosure considerations regarding whether “Chinese governmental authorities have significant discretion that can be used to influence how the company conducts its business operations”).