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The Financial Reporting Council (FRC) has launched a consultation on a temporary amendment to its Third Country Auditor (TCA) policy in a bid to attract more Chinese listings.
The proposal would allow auditors of Chinese-registered entities listing Global Depositary Receipts (GDRs) in London to use Chinese Standards on Auditing (CSAs) rather than International Standards on Auditing (ISAs).
The move follows a request from the UK government to address a perceived regulatory barrier that may discourage Chinese issuers from choosing London as a listing venue.
The amendment is specifically designed to support the Shanghai/Shenzhen Stock Connect agreement between the Financial Conduct Authority (FCA) and the China Securities Regulatory Commission (CSRC).
The FRC stated that the proposed change is narrowly scoped and time-limited. Key features of the proposal include:
- Limited application: The amendment applies only to the Stock Connect segment of the London Stock Exchange (LSE) International Order Book. It does not affect other China-registered issuers.
- TCA registration: Auditors using CSAs must still register with the FRC as Third Country Auditors and remain subject to ongoing supervision and potential deregistration for non-compliance.
- Transparency: Issuers must provide clear disclosures in their UK admission prospectuses stating that CSAs have been used and have not been determined equivalent to ISAs by the UK.
If approved, the amendment would apply to financial years commencing on or after 1 January 2026, aligning with the calendar year-end followed by most Chinese issuers.
The government’s strategy aims to strengthen London’s competitiveness as a global financial centre.
The FRC said: “By accepting CSAs temporarily, the UK aims to prevent high-growth entities from choosing alternative venues where Chinese standards are already accepted. Attracting these listings brings them under UK regulatory oversight. This provides greater protection for UK investors who might otherwise trade these securities on overseas markets where the FRC has no direct visibility of audit quality.”
