(Yicai Global) April 22 -- Property transaction and service provider Ke Holdings and electric car startup Li Auto, both listed in New York, are looking at ways to ensure that they keep their US listings after the two Chinese firms together with 15 others were flagged by US securities regulators yesterday of being in violation of its auditing requirements, The Paper reported.

Both companies are addressing the audit issue and working to make sure that they remain compliant with both US and Chinese laws, they said in separate statements. The firms have been given until May 12 to submit their defense.

The warning is not expected to have any impact on business, Li Auto said. Its stocks in Hong Kong and on the Nasdaq are interchangeable, allowing US investors to convert their stocks. The primary listing in Hong Kong is not subject to US regulations.

The US Securities and Exchange Commission released a list of 17 Chinese firms yesterday that are in danger of being delisted for using auditors that are not compliant with the Holding Foreign Companies Accountable Act. The act, which was passed by the Trump administration in 2020, requires all foreign companies that have gone public in the US to, among other things, meet the Public Company Accounting Oversight Board’s accounting requirements.

Should a company’s annual financial report fail to pass the review of the PCAOB for three consecutive years, it will be prohibited from trading on any US bourse or over-the-counter market.

The ruling has put many companies off from choosing the US as an overseas listing destination as the sharing of company accounts overseas contravenes China’s own data security regulations.

China and the US continue to work closely on cross-border auditing requirements and an agreement should be reached before long, Fang Xinghai, vice chairman of the China Securities Regulatory Commission, said yesterday. The two sides meet by video conference every week to discuss the matter and uncertainties should be cleared up soon.

Editor: Kim Taylor