SEC Approves PCAOB Framework For Determinations Under Holding Foreign Companies Accountable Act

On November 5, 2021, the SEC approved Rule 6100, Board Determinations Under the Holding Foreign Companies Accountable Act, of the Public Company Accounting Oversight Board (PCAOB). Rule 6100 establishes a framework for the PCAOB's determinations under the Holding Foreign Companies Accountable Act (HFCAA) that the PCAOB is unable to inspect or investigate completely registered public-accounting firms located in a foreign jurisdiction because of a position taken by an authority in that jurisdiction. Rule 6100 is effective immediately.

The HFCAA was enacted in December 2020 and requires foreign companies and their auditing firms to submit to U.S.-regulator inspections of their audits—or face trading prohibitions on U.S. stock exchanges and over-the-counter markets for failure to have an inspection for three consecutive years. Although the HFCAA is applicable to all foreign jurisdictions, China-based companies are significantly affected because China has not permitted