Market Trends 2025/26: Disclosure on the Holding Foreign Companies Accountable Act

This practice note examines the Holding Foreign Companies Accountable Act (HFCAA) and its implications for foreign companies whose securities trade on U.S. national securities exchanges or over-the-counter markets. It outlines the HFCAA framework governing issuers whose auditors cannot be inspected or investigated completely by the Public Company Accounting Oversight Board (PCAOB), including issuer identification, disclosure requirements and potential trading prohibitions after two consecutive non-inspection years.

The note traces developments concerning PCAOB access to audit firms in mainland China and Hong Kong, including the 2022 Statement of Protocol, subsequent inspections and enforcement activity, and the PCAOB’s continuing authority to issue new HFCAA determinations. It also covers SEC Staff guidance addressing PRC-based companies, government ownership and control, variable interest entity structures, required approvals, government intervention and related regulatory risks.

Drawing on recent SEC filings, the note surveys HFCAA-related disclosure practices in the Business, Risk Factors, and Management’s Discussion and Analysis sections, including disclosure concerning auditor inspection status, delisting and trading risks, foreign regulation, and China-related operations. It concludes by addressing disclosure enhancements concerning HFCAA status, audit committee oversight, risk management, auditor changes, potential delisting, Nasdaq listing standards, SEC enforcement scrutiny, and geopolitical risks.

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