House Subcommittee ignores funding of sanctioned Chinese companies, overlooks violations of U.S. securities laws
Washington. The Coalition for a Prosperous America (CPA) this week sent a letter to Rep. Gerald E. Connolly (D-VA) expressing concern over his investigation of a decision to withhold federal employees’ retirement money from Chinese companies. Connolly, the Chairman of the House Subcommittee on Government Operations, recently wrote to Labor Secretary Eugene Scalia regarding the Federal Retirement Thrift Investment Board’s (FRTIB) decision not to invest billions of dollars in federal retirement assets in a fund that includes sanctioned Chinese companies. Connolly is now questioning the process of the decision to block such investment.
“This is a very misguided effort,” said CPA Chair Dan DiMicco. “The American people overwhelmingly oppose the funding of companies that have been sanctioned by the U.S. government, especially entities that enable human rights violations or provide weapons to rogue regimes. The Federal Retirement Thrift Investment Board made absolutely the right decision to halt the transfer of federal employee pension funds to an index that includes state-directed Chinese companies posing a threat to our national security.”
In November 2017, the FRTIB announced a plan to move roughly $50 billion of its overall pension program to the MSCI All-Country World Index by June 2020. That index includes a number of companies controlled by the Chinese Communist Party (CCP). CPA actively opposed the plan; the FRTIB Board subsequently voted to pause its implementation.
In a letter to Rep. Connolly, CPA praised the FRTIB decision and pointed to an equally pressing concern—the more than 180 Chinese companies currently listed in U.S. stock markets that violate securities laws. Not only do these Chinese entities refuse Public Company Accounting Oversight Board (PCAOB) access to financial records but they also do not comply with Sarbanes-Oxley or Dodd-Frank.
“Rep. Connolly is barking up the wrong tree,” said Michael Stumo, CEO of the CPA. “How do Chinese companies get to play by a different set of rules than the rest of the world? Our nation would be much better served if Rep. Connolly investigated why scores of unchecked and potentially fraudulent Chinese stocks are listed in U.S. financial markets. This has been a problem for over a decade and was exacerbated in 2013. Congress must protect America’s workers and financial institutions, not advocate for sending hard-earned retirement money to companies already sanctioned by the U.S. government.”
The Coalition for a Prosperous America (CPA) has endorsed the EQUITABLE Act, which would block certain companies based in China and Hong Kong from accessing U.S. capital markets.
Read more about Chinese companies listed on U.S. stock exchanges that are shielded from the full oversight of financial regulators.