A bipartisan coalition of U.S. senators voiced their support for efforts by the Securities and Exchange Commission (SEC) to address risks to U.S. investors and markets from China-linked entities accessing U.S. capital markets.
In a letter to SEC Chairman Paul Atkins, the senators raised concerns about risks posed by opaque corporate structures, including variable interest entities (VIEs). They also raised concerns about PRC legal and data-sharing requirements that may limit regulatory oversight and expose sensitive information of U.S. investors. Further, the lawmakers highlighted the challenges U.S. regulators face in obtaining critical information due to PRC restrictions and underscored the importance of continued vigilance against fraud, manipulation, and misleading disclosures tied to foreign issuers.
“China’s access to U.S. markets – without appropriate safeguards – can put American investors and our financial system at greater risk… the PRC directly and indirectly exerts pressure on Chinese-owned and controlled entities to prioritize Beijing’s geopolitical interests – not the well-being of U.S. investors and the integrity of our financial markets,” the senators wrote in a letter to Atkins. “American investors in these structures will – sometimes unknowingly – purchase shares in an offshore shell company contractually tied to a PRC-based operating entity… the structure leaves investors without insight into the operating entity’s true ownership structure, with weak contractual claims, and with little or no meaningful legal protection.”
The letter was led by Senate Banking Committee Chairman Tim Scott (R-SC) and Ranking Member Elizabeth Warren (D-MA) .
“The SEC is doing important work to protect American investors, and this bipartisan effort builds on that foundation. As China continues to exploit gaps in our markets, we must ensure that our regulatory framework keeps pace – strengthening transparency, safeguarding investor data, and preserving the integrity of the world’s premier capital markets,” Scott said.
It was also signed by Senate Banking Committee Sens. Mike Crapo (R-ID), Mike Rounds (R-SD), Thom Tillis (R-NC), John Kennedy (R-LA), Bill Hagerty (R-TN), Cynthia Lummis (R-WY), Katie Britt (R-AL), Pete Ricketts (R-NE), Jim Banks (R-IN), Kevin Cramer (R-ND), Bernie Moreno (R-OH), Dave McCormick (R-PA), Chris Van Hollen (D-MD), Raphael Warnock (D-GA), Andy Kim (D-NJ), and Lisa Blunt Rochester (D-DE).
“The SEC has a responsibility to ensure that Chinese companies and other foreign actors are not exploiting shadowy investment vehicles to access our markets, vacuum up sensitive financial and consumer data for misuse by the Chinese government, and leave millions of American investors at risk,” Warren said. “There’s no excuse for ignoring these growing concerns, and Congress will keep pushing the SEC to act to protect investors and our markets.”