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Washington, D.C. — U.S. Senators Marco Rubio (R-FL), Tom Cotton (R-AR), and Rick Scott (R-FL) urged Senators Mike Crapo (R-ID) and Sherrod Brown (D-OH), the Chairman and Ranking Member of the Senate Committee on Banking, Housing, and Urban Affairs, to expediently consider and report the bipartisan, bicameral Ensuring Quality Information and Transparency for Abroad-Based Listings on our Exchanges (EQUITABLE) Act (S.1731) to the full Senate. The legislation would increase oversight of Chinese and other foreign companies listed on American exchanges and delist firms that are out of compliance with U.S. regulations for a period of three years. Rubio previewed the legislation last year in an op-ed in The Wall Street Journal. A one-pager of the legislation is available here.
 
“Currently, Chinese companies listed on U.S. stock exchanges, including state-owned enterprises, are widely shielded by the Chinese government from meaningful oversight by American financial regulators, including the Public Company Accounting Oversight Board (PCAOB),” the senators wrote. “American investors, particularly small everyday retail investors, have little or no recourse when defrauded by predatory Chinese companies. It falls to Congress to ensure that the standards set about in law are applied across the board without preference for companies from one nation or another.”
 
The full text of the letter is below.
 
Dear Chairman Crapo and Ranking Member Brown:
 
We respectfully request that the Senate Committee on Banking, Housing, and Urban Affairs expediently consider and report S.1731, the EQUITABLE Act, to ensure that U.S. accounting and oversight regulations are applied equally to all firms listed on U.S. securities exchanges. Currently, Chinese companies listed on U.S. stock exchanges, including state-owned enterprises, are widely shielded by the Chinese government from meaningful oversight by American financial regulators, including the Public Company Accounting Oversight Board (PCAOB).
 
This untenable situation has created an unfair advantage for Chinese over American companies. While Chinese companies can escape full U.S. oversight of accounting laws, their American counterparts are subject to thorough inspection by the PCAOB. Recent financial scandals involving Chinese companies listed on U.S. stock exchanges, like Luckin Coffee, demonstrate the need for full oversight of Chinese companies. They also highlight the ongoing harm to American investors and capital markets caused by this bifurcated system. Chinese companies can ignore U.S. laws while reaping the benefits associated with accessing the world’s deepest and most liquid capital markets.
 
The Securities and Exchange Commission (SEC) has recently issued statements highlighting the risks posed by emerging markets, including Chinese firms listed on American stock exchanges. While these warnings are a welcome development, they are not a solution to the problem. The problem is not that the market has insufficiently priced in the “risk” that Chinese companies report bad information, but that Chinese companies operate under a categorically different financial regime than their American counterparts. 
 
American investors, particularly small everyday retail investors, have little or no recourse when defrauded by predatory Chinese companies. It falls to Congress to ensure that the standards set about in law are applied across the board without preference for companies from one nation or another.
 
Thank you for your consideration. We look forward to assisting in any way to ensure that this important concern is fully addressed.
 
Sincerely,