Jun 25 2020
“Now is the time for both chambers of Congress to ensure that firms beholden to Communist China finally let U.S. regulators examine their books—to stop them from swindling American investors.”
WASHINGTON – Sens. John Kennedy (R-La.) and Chris Van Hollen (D-Md.) have introduced the Holding Foreign Companies Accountable Act as an amendment to the National Defense Authorization Act (NDAA). The bill passed the Senate unanimously this May.
Kennedy and Van Hollen introduced the legislation to protect American investors and their retirement savings from foreign companies that have been operating on U.S. stock exchanges while flouting Securities and Exchange Commission (SEC) oversight.
“Every day that lawmakers fail to act gives fraudulent Chinese companies the chance to continue exploiting hardworking Americans. The Senate has already endorsed this bill unanimously, and it has the SEC’s support as well. Now is the time for both chambers of Congress to ensure that firms beholden to Communist China finally let U.S. regulators examine their books—to stop them from swindling American investors,” said Kennedy.
“From retirement accounts to their children’s savings plans, many Americans rely on investments to support their futures. But for too long, investors have not been provided accurate or timely information from Chinese companies registered on U.S. exchanges—costing Americans dearly. Publicly listed companies should all be held to the same standards, and our proposal would ensure that. I’m glad this provision has already passed the Senate with unanimous support, I urge my colleagues to get this done,” said Van Hollen.
Sens. Kevin Cramer (R-N.D.), Tom Cotton (R-Ark.), Bob Menendez (D-N.J.), Marco Rubio (R-Fla.) and Rick Scott (R-Fla.) have cosponsored the NDAA amendment.
The Holding Foreign Companies Accountable Act prohibits securities of a company from being listed on any of the U.S. securities exchanges if the company has failed to comply with the Public Company Accounting Oversight Board’s (PCAOB) audits for three years in a row.
The bill would also require public companies to disclose whether they are owned or controlled by a foreign government, including China’s communist government.
Many Americans invest in U.S. stock exchanges as part of their retirement savings, and dishonest companies operating on the exchanges put Americans at risk. This legislation protects the interest of American investors by ensuring that foreign companies traded in America are subject to the same independent audit requirements that apply to American companies.
Congress established the PCAOB to inspect audits of public companies, ensuring the information companies provide to the public is accurate, independent and trustworthy.
Currently, China’s communist government refuses to allow the PCAOB to inspect audits of companies registered in China and Hong Kong. Such companies represent a keen risk to American investors as nearly 11 percent of all securities class action lawsuits in 2011 were brought against Chinese-owned companies accused of misrepresenting themselves in financial documents.
According to the SEC, 224 U.S.-listed companies are located in countries where there are obstacles to PCAOB inspections. These companies have a combined market capitalization of more than $1.8 trillion.
In the last 10 years, the number of Chinese companies listed on U.S. stock exchanges has increased significantly, as those firms take advantage of the capital available in America.