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After reading an interesting opinion piece, the regulatory oversight that we have come to expect in the post-Enron world (via Sarbanes-Oxley Act) seems somewhat jeopardized. Namely, the oversight on emerging markets ETFs is made out to be very limited/non-existent from the columnist's portrayal:

There has to be someone on the buy side to pay for all this Wall Street-minted SOE paper. Nearly 40% of the BlackRock-managed iShares Emerging Markets ETF is represented by this Chinese paper. How much of it is pure dross is hard to say, as U.S. regulators in the form of the Public Company Accounting Oversight Board, established by the Sarbanes-Oxley Act, are prevented from overseeing audits of these companies.

However, the article doesn't mention the specifics -- simply saying regulators are "prevented" from overseeing audits. I'm assuming this is because Chinese regulators don't disclose the audits to US counterparts, but I'm not sure.

Question

Is this oversight blackout a result of some other legislation that supersedes the Sarbanes-Oxley Act or is it more of a case of weak enforcement mechanisms?

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Neither nor. It is if anything a result of a way too US centric view of the lawmakers. It is OBVIOUS that an ETF that is focused on emerging markets will be quite heavily focused on the largest emerging market - by FAR - in the world, which is china. And those companies will not follow US laws. Bascially if you enforce US laws on that ETF - you don't have an ETF.

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