On Tuesday, U.S. Sen. Rick Scott, R-Fla. sent a letter to U.S. stock exchanges, major pension plans and underwriters urging them to review their policies and discontinue coordination with U.S.-listed Chinese-based companies considering the growing threat of Communist China.
In February, Scott expressed his concerns to the SEC chairman about how U.S.-listed Chinese companies present regulatory, oversight and enforcement challenges that undermine transparency and confidence in American markets.
Scott’s letter is below.
Dear CEO\Director\President:
I am very concerned about the growing threat of Communist China and its impact on U.S. investors, including pension funds.
Communist China continues to steal our technology and intellectual property, refuses to open their markets, and has shown they cannot be trusted. The leaders of the Communist Party of China are actively trying to access all the data of any foreign company working in the country. Everything a business does in Communist China is shared directly with a government that is jailing its people for their religious beliefs, refuses to respect basic human rights and is building up their industrial and military strength in an effort to dominate the world. U.S.-listed Chinese companies present regulatory, oversight and enforcement challenges that undermine transparency and confidence in American markets. U.S. investors have few legal and even fewer practical remedies when Chinese firms that raise capital on U.S. stock markets do not comply with U.S. disclosure rules, or flaunt our regulatory requirements.
I have expressed my concerns to the U.S. Securities and Exchange Commission (SEC), and urged them to require disclosures for investors, outlining the alarming reality of the risks they face by investing their hard earned dollars in companies doing business with Communist China. I am also working to prevent the Federal Retirement Thrift Investment Board from steering federal retirement savings to Communist China – and every pension plan needs to follow suit to protect American investors.
In response to my requests, the SEC has announced concrete steps to discuss the disclosure and enforcement issues and address Communist China’s complete lack of cooperation and the risk to U.S. investors. The attached correspondence from SEC Chairman Clayton highlights in detail the risk associated with Chinese-based companies listed on U.S. stock exchanges. Chairman Clayton outlined the shocking extent to which the Communist Party of China and companies under its control are eluding U.S. laws and enforcement mechanisms, saying, “To put it bluntly, and noting that in some emerging market jurisdictions the issue is not as acute, laws without meaningful inspection and enforcement capabilities are little more than words.” Chairman Clayton also warns that, “As a result, there is substantially greater risk that disclosures will be incomplete or misleading and, in the event of investor harm, substantially less access to recourse, in comparison to U.S. domestic companies. I also note that the ability of U.S. authorities to bring actions against non-U.S. persons, including company directors and officers, in emerging markets is often limited. In my experience, when this individual accountability is lacking, investor risk increases significantly.”
In light of this acknowledged and growing threat, I write to ask you how you and your organization can continue to feel comfortable selling, purchasing, or underwriting these securities when the risk to U.S. investors is so clear and present. I urge you to review your policies and discontinue selling, purchasing, or underwriting U.S. listed Chinese-based companies stock for the protection of your investors and American capital markets. We can no longer allow Communist China to get away with flouting our laws, defrauding our citizens and harming American investments. This must end now.
Thank you for your cooperation and consideration as we work to combat this threat and protect Americans.
