Chairman Scott, Ranking Member Warren Lead Bipartisan Letter to SEC on Risks from China-Linked Entities in U.S. Markets

Chairman Scott, Ranking Member Warren Lead Bipartisan Letter to SEC on Risks from China-Linked Entities in U.S. Markets

Washington, D.C. - Senate Banking Committee Chairman Tim Scott (R-S.C.) and Ranking Member Elizabeth Warren (D-Mass.) were joined by Banking Committee Senators Mike Crapo (R-Idaho), Mike Rounds (R-S.D.), Thom Tillis (R-N.C.), John Kennedy (R-La.), Bill Hagerty (R-Tenn.), Cynthia Lummis (R-Wyo.), Katie Britt (R-Ala.), Pete Ricketts (R-Neb.), Jim Banks (R-Ind.), Kevin Cramer (R-N.D.), Bernie Moreno (R-Ohio), Dave McCormick (R-Pa.), Chris Van Hollen (D-Md.), Raphael Warnock (D-Ga.), Andy Kim (D-N.J.), and Lisa Blunt Rochester (D-Del.) in sending a bipartisan letter to Securities and Exchange Commission (SEC) Chair Paul Atkins supporting the Commission's ongoing efforts to address risks to U.S. investors and markets from China-linked entities accessing U.S. capital markets.

The letter builds on the SEC's recent work, including its Cross-Border Task Force to Combat Fraud, and highlights areas where additional review may help strengthen investor protection, market integrity, and national security safeguards.

"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," said Chairman Scott.

"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," said Ranking Member Warren. "There's no excuse for ignoring these growing concerns, and Congress will keep pushing the SEC to act to protect investors and our markets."

In the letter, the lawmakers wrote, "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 lawmakers continued, "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 raises concerns about risks posed by opaque corporate structures, including variable interest entities (VIEs), as well as PRC legal and data-sharing requirements that may limit regulatory oversight and expose sensitive information of U.S. investors. The lawmakers also highlight the challenges U.S. regulators face in obtaining critical information due to PRC restrictions and underscore the importance of continued vigilance against fraud, manipulation, and misleading disclosures tied to foreign issuers.

To read the full letter, click here.

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