New Oriental Education stock drops after being named as identified issuer under the HFCAA

The U.S.-listed shares of New Oriental Education & Technology Group Inc. EDU, -2.49% dropped 4.2% in premarket trading Monday, after the China-based provider of private educational services said it was provisionally named by the U.S. Securities and Exchange Commission (SEC) as an identified issuer under the Holding Foreign Companies Accountable Act (HFCAA). The identification means that SEC determined that the company used an auditor in filing its annual report whose working paper can’t be completely inspected or investigated by the U.S. Public Company Accounting Oversight Board (PCAOB). Under the HFCAA, the SEC prohibits a foreign company’s shares to be traded in the U.S. if the company is an identified issuer for the three-straight years. “This is the first time that the company was named so after the SEC started to make such identification pursuant to the HFCAA and its implementation rules issued thereunder,” New Oriental said in a statement. “The company has been actively exploring possible solutions to protect the interest of its stakeholders.” New Oriental’s stock has rallied 7.1% over the past three months, while the iShares China Large-Cap ETF FXI, -2.37% has tumbled 21.6% and the S&P 500 SPX, -2.80% has lost 6.7%.