Young expresses concerns to SEC about US investments in Chinese firms.
Sen. Todd Young Urges SEC to Protect American Investors from Chinese Companies
Sen. Todd Young (R-IN) has expressed his concerns about the potential risks faced by American investors from publicly traded companies based in China. In a letter to Gary Gensler, the chairman of the Securities and Exchange Commission (SEC), Young emphasized the need for additional measures to safeguard traders and fiduciaries.
Young highlighted the “chronic, often intentional, lack of transparency; poor corporate governance or fraudulent behaviors” exhibited by Chinese companies traded in the United States. He also warned about the possibility of “arbitrary or spurious” enforcement actions by Chinese regulators.
Protecting Military Readiness and National Security
These concerns are not only related to financial risks but also to the Chinese government’s manipulation of global financial markets and its ability to evade oversight by American regulators.
“In addition, Chinese corporations are not incentivized to properly disclose their business practices because the enforcement options available to U.S. regulators pale in comparison to the punitive threat from state regulators in the [People’s Republic of China],” Young explained.
Young provided examples of five companies that exemplify these concerns: iQiyi, Luckin Coffee, TAL Education Group, HNA Group, and Evergrande Group.
“Generally, I am concerned that U.S. investors, especially passive investors in indexes and exchange-traded funds (ETFs), are still unaware of the risks posed to their investments by the mere presence of Chinese companies in their funds,” Young stated. He also emphasized the additional layer of risk posed by Chinese military and political aggression, including against Taiwan.
Young’s concerns have been further heightened by the Chinese government’s request for these companies to switch from independent and regulated auditors to Chinese-based auditors, which he believes are “more susceptible to state influence and coercion.”
As part of his efforts to improve transparency, Young posed a series of eight questions to Gensler regarding these publicly traded companies.
“In light of these concerns, I believe that additional informational and regulatory actions by the SEC need to be on the table to protect American markets, shareholders, and our economic and national security,” Young concluded.
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