As we look ahead to the upcoming annual reporting season, don’t forget about new Item 9C of Form 10-K, which was added under the “Holding Foreign Companies Accountable Act.” The Stinson blog points out that the HFCAA will affect your Form 10-K even if you’re not directly impacted by the law:
The HFCA Act became law on December 18, 2020. Among other things the HFCA Act requires the SEC to identify each “covered issuer” that has retained a registered public accounting firm to issue an audit report where that registered public accounting firm has a branch or office that:
– Is located in a foreign jurisdiction; and
– The PCAOB has determined that it is unable to inspect or investigate completely because of a position taken by an authority in the foreign jurisdiction.
We do not expect the HFCAA to affect the issuers we work with. We do note however that the SEC interim amendments requires companies subject to the interim rules to make certain disclosures in new Item 9C to Form 10-K captioned “Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.” As such issuers should include the Item and caption in their Form 10-K and indicate the item is not applicable where appropriate.
We’ve blogged about the HFCAA a few times – including back in March, when the SEC adopted interim final rules, and in late summer, when SEC Chair Gary Gensler talked about additional disclosure requirements for China-based companies.
– Liz Dunshee