U.S. Rep. John Moolenaar (R-MI), chairman of the U.S. House Select Committee on China, is requesting that the Securities and Exchange Commission (SEC) restrict access to America’s capital markets by Chinese military companies operating directly or indirectly in the United States.
“These companies have no business trading on U.S. exchanges, and we respectfully urge the commission to consider what actions within its existing authority might appropriately address the ability of these companies to access U.S. capital markets and raise funds that may support the People’s Liberation Army’s modernization efforts,” wrote Rep. Moolenaar and U.S. Sen. Rick Scott (R-FL) in a July 16 letter sent to SEC Chairman Paul Atkins.
The lawmakers noted that on June 8, the U.S. Department of Defense released a revision to the statutorily required Section 1260H list of Chinese military companies operating directly or indirectly in the United States.
The department’s expansion of the 1260H list — adding 65 entities beyond last year’s list — represents the most robust assessment of the threat posed by these companies to the U.S., according to their letter.
The SEC has broad oversight jurisdiction over American national exchanges by law and regulation, they pointed out, and should take specific steps to utilize its pre-existing authorities to initiate action within 60 days of the letter’s postmarked date, including to initiate a Notice of Proposed Rulemaking to establish a ticker-level disclosure requirement for sanctioned issuers.
“We would require U.S. national securities exchanges to append a standardized suffix or flag to the ticker symbol of any listed company within 30 days of that company’s designation on any U.S. government sanctions list, including but not limited to the Section 1260H list of Chinese military companies,” wrote Rep. Moolenaar and his colleague.
Such a ticker-level flag would function “analogously” to existing exchange-assigned suffix codes that alert investors to material status changes, such as filing delinquencies or bankruptcy proceedings, and would provide investors with clear, visible notice of national security related designations, they added.
Additionally, the lawmakers requested that the SEC temporarily suspend the trading of securities of any company headquartered in, or beneficially owned by an entity or government of, a foreign country of concern upon that company’s addition to a sanctions list maintained by the U.S. government.
“A temporary 10 business day suspension would provide the commission with a reasonable opportunity to assess whether additional or more permanent action is warranted, while signaling to the market that designation carries consequences,” they wrote.
Rep. Moolenaar and his colleague requested Atkins provide them with a written response by the close of business on July 23 indicating the SEC’s assessment of and intentions regarding their requests.