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Washington, D.C. — U.S. Senator Marco Rubio (R-FL) released the following statement after President Trump said his Administration would examine Chinese companies listed on American exchanges that are out of compliance with U.S. regulators and laws for financial transparency and accountability. Last year, Rubio introduced bipartisan, bicameral legislation to ban Chinese and foreign firms that flaunt U.S. laws from the U.S. exchanges. Rubio previewed the legislation in an op-ed in The Wall Street Journal. A one-pager of the legislation is available here.
 
“The President is absolutely right to direct the Administration to examine how Chinese companies exploit U.S. capital markets and run afoul of our laws and regulations that protect retail investors and pensioners,” Rubio said. “My bipartisan EQUITABLE Act would better protect American retail investors and pensioners from risky investments in fraudulent, opaque Chinese companies that are listed on U.S. exchanges. The U.S. government cannot allow the Chinese government and Communist Party to continue to exploit our capital markets and flaunt our laws. The recent Luckin Coffee scandal — just one of many examples of Chinese fraud — should be a major wake-up call for policymakers and regulators that the time for action is now. If Chinese companies want access to the U.S. capital markets, they must comply with American laws and regulations for financial transparency and accountability.”
 
Background:

• In February 2020, the Securities and Exchange Commission (SEC) released a statement regarding the difficulties U.S. regulators face when auditing U.S.-listed companies based in China, and how over the past decade, U.S. investors, and the U.S. capital markets more generally, have become more exposed to companies with significant operations in emerging markets, including China, the largest emerging market economy.
• In December 2018, the SEC and the Public Company Accounting Oversight Board (PCAOB) issued a joint warning to investors about the challenges American regulators face when attempting to conduct oversight of U.S.-listed companies whose operations are based in China and Hong Kong.
• While the PCAOB regularly inspects audits of U.S.-listed firms at home and abroad, Beijing consistently and systemically challenges those efforts. For example, Chinese law requires that records remain in China, and the Communist Party routinely restricts access to typical accounting information on the grounds of national security and state secrecy.
• The U.S.-China Economic and Security Review Commission identified 156 Chinese companies, including 11 state-owned-enterprises, that are listed on America’s three largest exchanges with a combined market capitalization of $1.2 trillion.
• In March 2018, the influential global index provider MSCI announced that it would quadruple its weighting of Chinese company shares in one of its key index products.