Van Hollen, Kennedy Ask SEC to Educate Investors About High-Risk Chinese Companies
U.S. Senators Chris Van Hollen (D-Md.) and John Kennedy (R-La.), members of the Senate Banking Committee, sent a letter to Investor Advocate Rick Flaming of the Securities and Exchange Commission (SEC) asking that he alert SEC leadership and the general public about the risk of investing in many Chinese companies.
“The fact that a Chinese company can be included in an index to avoid the SEC’s rigorous company-specific disclosure and audit regulations seems to fly in the face of the investor protection mandate of the Commission, your office, and the Investor Advisory Committee,” wrote the senators.
“Americans are increasingly concerned that the federal government is not doing enough to address the threat that China poses to our capital markets and national security. A recent survey found that 72% of Americans believe if Chinese companies want to list in the United States, they should have to satisfy the same regulatory requirements as U.S. businesses. These developments have increased our concerns about the protection of American investors who are unknowingly investing in the self-dealing, human rights abuses, cyberattacks, and frauds perpetrated by the Chinese Communist Party through these companies,” the senators continued.
The Dodd-Frank Act created the Office of the Investor Advocate in 2010 to give American retail investors a voice on decisions the SEC oversees. The Investor Advocate is also required to inform Congress and the SEC about serious risks that threaten Main Street investors.
Van Hollen and Kennedy encouraged Fleming to hold a hearing to educate investors about the various risks Americans face when they invest in Chinese businesses listed on U.S. exchanges and registered with the SEC. Those risks include fraud, espionage, human rights abuse and funding the Chinese Communist Party.
In 2019, Van Hollen and Kennedy introduced the Holding Foreign Companies Accountable Act, which would address one of the SEC’s most significant issues in overseeing the financial reporting of U.S.-listed, China-based companies. The bill would require companies to provide proof they are not implicitly state-owned and prohibit them from being publicly listed if they refuse inspection of their records for three consecutive years.
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