Congressman Sherman Holds Hearing on Risks China poses to American investors
Washington, D.C. – Congressman Brad Sherman (D-CA), Chairman of the House Financial Services Subcommittee on Capital Markets and Investor Protection, convened a hearing today examining the risks China poses to American investors and U.S. Capital markets as growing engagement between U.S. investors and China-based companies, which have sought to raise capital by issuing registered and unregistered securities in the U.S., has produced several risks to investor protection, the American economy, and national security.
“The intertwining of the American and Chinese economies has given China substantial power here in the United States, it really hasn’t given America any political power in Beijing,” said Congressman Sherman. “There are those who think we shouldn’t encourage or allow investment in China because that means American capital is flowing to their economy. But let’s remember this is a two-way street. And we do have to make sure if it is going to be a two-way street that it is a fair street.”
Among the risks to U.S. investors include lack of corporate transparency and reliable financial information, increased corporate fraud, lack of legal recourse for U.S. investors, and other legal barriers that prevent U.S. securities regulators from conducting effective oversight of foreign issuers, and more recently, an increase in regulatory activity by Chinese authorities targeting China-based companies.
A number of important bills were raised during the hearing. One was the Accelerating Holding Foreign Companies Accountable Act, introduced by Congressman Sherman, would shorten the time period in the Holding Foreign Companies Accountable Act from three years to two years for foreign companies to comply with PCAOB audits or face delisting from US exchanges.
Another important bill, H.R. 2072 Uyghur Forced Labor Disclosure Act introduced by Congresswoman Jennifer Wexton and co-sponsored by Congressman Sherman. This bill requires issuers of securities to publicly disclose their activities related to China's Xinjiang Uyghur Autonomous Region. Specifically, issuers must disclose the importation of manufactured goods and materials that originated or are sourced from that region, as well as details about the commercial activity, gross revenue and net profits, and future import plans regarding these goods and materials. Furthermore, issuers must disclose whether any of these goods or materials are from forced labor camps.
Sherman concluded the hearing saying: “The purpose of this subcommittee is to protect investors investing in U.S. markets, U.S. exchanges, exchange traded funds regulated by U.S. laws, mutual funds and more. They expect to have investor protection. We’ve got a lot to do to protect American investors in China, and even more to do with the overall relationship with China."