WASHINGTON – Today the Senate passed the Holding Foreign Companies Accountable Act by unanimous consent. Sens. John Kennedy (R-La.) and Chris Van Hollen (D-Md.) introduced the legislation to protect American investors and their retirement savings from foreign companies that have been operating on U.S. stock exchanges while flouting Securities and Exchange Commission (SEC) oversight.
“The SEC works hard to protect American investors from being swindled by American companies. It’s asinine that we’re giving Chinese companies the opportunity to exploit hardworking Americans—people who put their retirement and college savings in our exchanges—because we don’t insist on examining their books. There are plenty of markets all over the world open to cheaters, but America can’t afford to be one of them. China is on a glidepath to dominance and is cheating at every turn. I hope my colleagues in the House will immediately send this bill to the president’s desk so we can protect Americans and their savings,” said Kennedy.
“As we continue to experience the economic fallout and volatility caused by the COVID-19 pandemic, the need to protect main street investors is all the more important. For too long, Chinese companies have disregarded U.S. reporting standards, misleading our investors. Publicly listed companies should all be held to the same standards, and this bill makes commonsense changes to level the playing field and give investors the transparency they need to make informed decisions. I’m proud that we were able to pass it today with overwhelming bipartisan support, and I urge our House colleagues to act quickly,” said Van Hollen.
The Holding Foreign Companies Accountable Act prohibits securities of a company from being listed on any of the U.S. securities exchanges if the company has failed to comply with the Public Company Accounting Oversight Board’s (PCAOB) audits for three years in a row.
The bill would also require public companies to disclose whether they are owned or controlled by a foreign government, including China’s communist government.
Many Americans invest in U.S. stock exchanges as part of their retirement savings, and dishonest companies operating on the exchanges put Americans at risk. This legislation protects the interest of hardworking American investors by ensuring that foreign companies traded in America are subject to the same independent audit requirements that apply to American companies.
Sens. Kevin Cramer (R-N.D.), Tom Cotton (R-Ark.), Bob Menendez (D-N.J.), Marco Rubio (R-Fla.) and Rick Scott (R-Fla.) have cosponsored the bill.
Congress established the PCAOB to inspect audits of public companies, ensuring the information companies provide to the public is accurate, independent and trustworthy.
Currently, China’s communist government refuses to allow the PCAOB to inspect audits of companies registered in China and Hong Kong. Such companies represent a keen risk to American investors as nearly 11 percent of all securities class action lawsuits in 2011 were brought against Chinese-owned companies accused of misrepresenting themselves in financial documents.
According to the SEC, 224 U.S.-listed companies are located in countries where there are obstacles to PCAOB inspections. These companies have a combined market capitalization of more than $1.8 trillion.
In the last 10 years, the number of Chinese companies listed on U.S. stock exchanges has increased significantly, as those firms take advantage of the capital available in America.