No official summary available for this bill.
[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[H.R. 9162 Introduced in House (IH)]
<DOC>
118th CONGRESS
2d Session
H. R. 9162
To amend the securities laws to require certain disclosures and reports
with respect to the exposure of issuers to China and the threat of
sudden loss of market access between the United States and China, and
for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
July 25, 2024
Mr. Luetkemeyer (for himself, Mr. Moolenaar, and Mr. Newhouse)
introduced the following bill; which was referred to the Committee on
Financial Services
_______________________________________________________________________
A BILL
To amend the securities laws to require certain disclosures and reports
with respect to the exposure of issuers to China and the threat of
sudden loss of market access between the United States and China, and
for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``PRC Risk Transparency Act''.
SEC. 2. CHINA EXPOSURE DISCLOSURES.
(a) Covered Issuer Disclosures.--Section 13 of the Securities
Exchange Act of 1934 (15 U.S.C. 78m) is amended by adding at the end
the following:
``(t) China Exposure Disclosures.--
``(1) In general.--Each covered issuer required to file an
annual report under subsection (a) shall disclose in that
report the following information, to the extent the information
would be material to investors, with respect to the period 1
year prior to the disclosure under this subsection:
``(A) China exposure.--
``(i) The percentage of the total revenue
and profits of the issuer that are derived from
each of--
``(I) the People's Republic of
China (`China');
``(II) Hong Kong; and
``(III) the Xinjiang Uyghur
Autonomous Region.
``(ii) The percentage and the total value
of the capital investment of the issuer that is
located in each of--
``(I) China;
``(II) Hong Kong; and
``(III) the Xinjiang Uyghur
Autonomous Region.
``(iii) The percentage and the total value
of the supply chain of the issuer that is
sourced from each of--
``(I) China;
``(II) Hong Kong; and
``(III) the Xinjiang Uyghur
Autonomous Region.
``(iv) Details on any joint venture with a
covered entity, including--
``(I) the covered entity in the
joint venture;
``(II) the percentage of total
revenue and of total profits of the
issuer that are derived from the joint
venture; and
``(III) the percentage and the
total value of the capital investment
associated with the joint venture.
``(B) Threat of sudden loss of market access.--
``(i) The anticipated impact of the
scenario described in paragraph (2) on the
business operations, supply chain, revenues and
profits, and future earnings of the issuer, to
the extent it would be material to investors.
``(ii) Whether the issuer has a plan in
place to deal with the scenario described in
paragraph (2).
``(iii) The outlines of the plan described
in clause (ii) and any actions the issuer is
taking to prepare for the scenario described in
paragraph (2).
``(C) Relationships with certain entities.--A list
of business relationships with any of the following
entities, their affiliates, and their subsidiaries:
``(i) Any entity on the Non-SDN Chinese
Military-Industrial Complex Companies List (NS-
CMIC List) maintained by the Office of Foreign
Assets Control of the Department of the
Treasury under Executive Order 14032 (86 Fed.
Reg. 30145; relating to addressing the threat
from securities investments that finance
certain companies of the People's Republic of
China), or any successor order.
``(ii) Any Chinese military company
identified by the Secretary of Defense pursuant
to section 1260H of the William M. (Mac)
Thornberry National Defense Authorization Act
for Fiscal Year 2021 (Public Law 116-283; 10
U.S.C. 113 note).
``(iii) Any entity included on any of the
following lists maintained by the Department of
Commerce in the following locations of the
Export Administration Regulations set forth in
subchapter C of chapter VII of title 15, Code
of Federal Regulations:
``(I) The Entity List set forth in
Supplement No. 4 to part 744 of the
Export Administration Regulations or
any successor regulations.
``(II) The Denied Persons List as
described in section 764.3(a)(2) of the
Export Administration Regulations or
any successor regulations.
``(III) The Military End User List
set forth in Supplement No. 7 to part
744 of the Export Administration
Regulations or any successor
regulations.
``(iv) Any entity on which sanctions have
been imposed by the Office of Foreign Assets
Control of the Department of the Treasury in
connection with human rights abuses.
``(v) Any entity that produces equipment
that is prohibited under the Report and Order,
Order, and Further Notice of Proposed
Rulemaking of the Federal Communications
Commission in the matter of Protecting Against
National Security Threats to the Communications
Supply Chain through the Equipment
Authorization Program (ET No. 21-232) and
Protecting Against National Security Threats to
the Communications Supply Chain through the
Competitive Bidding Program (EA Docket No. 21-
233; FCC 22-84; adopted November 11, 2022).
``(vi) An entity on the Uyghur Forced Labor
Prevention Act Entity List of the Forced Labor
Enforcement Task Force.
``(D) Ties to the government of the people's
republic of china.--A list of the following:
``(i) Employees with a management role in
the issuer that are members of the Chinese
Communist Party, including each employee's role
within the issuer.
``(ii) Any business relationships with an
agency or instrumentality of the government of
the People's Republic of China, including the
provision of goods, services, or technology to
the People's Liberation Army, the Ministry of
State Security, or other security or
intelligence services in the People's Republic
of China.
``(iii) Any investment received from the
government of the People's Republic of China or
an agency or instrumentality thereof.
``(iv) Any requests from any Chinese
Communist Party official or agency or
instrumentality of the government of the
People's Republic of China (including requests
made under the People's Republic of China
Intelligence Law of 2017 or the Counter-
Espionage Law) that conflict with the issuer's
obligations under this Act, the Securities Act
of 1933, or the Sarbanes-Oxley Act of 2002.
``(2) Scenario.--
``(A) In general.--The scenario described in this
paragraph is a scenario where, owing to an act of
Chinese military aggression--
``(i) the President imposes sanctions on
China, Chinese entities, and those who transact
with China or Chinese entities of a similar
type and magnitude as the sanctions imposed on
the Russian Federation, Russian entities, and
those who transact with the Russian Federation
or Russian entities in response to the Russian
Federation's February 2022 invasion of Ukraine;
``(ii) the Secretary of Commerce implements
export controls with respect to China of a
similar type as the Secretary implemented with
respect to the Russian Federation following the
Russian Federation's February 2022 invasion of
Ukraine;
``(iii) trade between the United States and
China declines by 80 percent and completely
ceases in goods with military end-use or dual-
use applications;
``(iv) the Chinese government imposes
similar sanctions, export controls, and trade
restrictions on the United States and United
States companies as the Russian Federation
government did following the Russian
Federation's February 2022 invasion of Ukraine;
and
``(v) the Chinese government seizes all
China-based assets of American companies that
could be re-purposed for military production.
``(B) Revisions.--On January 1, 2028, and every 3
years thereafter, the Financial Stability Oversight
Council may revise the scenario described under
subparagraph (A) by publishing a new scenario that,
after consultations with other executive branch
officials, seems most likely to occur as a result of
Chinese military aggression.
``(3) Board of directors certification.--The board of
directors of a covered issuer required to make a disclosure
under paragraph (1) shall certify that the board has reviewed
and affirmed the disclosure.
``(4) Rulemaking.--
``(A) In general.--Not later than the end of the
60-day period beginning on the date of enactment of
this subsection, the Commission shall issue rules to
carry out the amendments made by this section.
``(B) Proprietary information and trade secrets.--
In issuing the rules required under subparagraph (A),
the Commission shall, in consultation with the Attorney
General and the National Security Council, ensure that
issuers may make the disclosure of information required
under such rules without disclosing proprietary
information or trade secrets.
``(C) Safe harbor.--In issuing the rules required
under subparagraph (A), the Commission shall establish
rules under which a covered issuer shall not be held
liable for statements that were compiled with
reasonable due diligence and to the best of the covered
issuer's knowledge.
``(5) Definitions.--In this subsection, the following
definitions apply:
``(A) China.--The term `China' means the People's
Republic of China, including all Special Administrative
Regions.
``(B) Control.--The term `control' has the meaning
given in section 800.208 of title 31, Code of Federal
Regulations (as in effect on the date of enactment of
this subsection).
``(C) Covered entity.--The term `covered entity'
means an entity--
``(i) that is incorporated in, has a
principal place of business in, or is organized
under the laws of the People's Republic of
China;
``(ii) the equity securities of which are
primarily traded in the ordinary course of
business on one or more exchanges in the
People's Republic of China;
``(iii) that is the Chinese Communist
Party, or the state or the government of the
People's Republic of China, as well as any
political subdivision, agency, or
instrumentality thereof; or
``(iv) that is subject to the direction or
control of any entity described in clause (i),
(ii), or (iii).
``(D) Covered issuer.--The term `covered issuer'
means--
``(i) an issuer--
``(I) with respect to which--
``(aa) at least 5 percent
of the revenue of the issuer is
derived from the Chinese
market;
``(bb) at least 5 percent
of the capital investment of
the issuer, by value, is
located in China; or
``(cc) at least 5 percent
of the supply chain of the
issuer, by value, is sourced
from China; and
``(II) that has a market
capitalization of $1,000,000,000 or
more at any point in the previous 365
days; and
``(ii) an issuer with respect to which--
``(I) at least 25 percent of the
revenue of the issuer is derived from
the Chinese market;
``(II) at least 25 percent of the
capital investment of the issuer, by
value, is located in China; or
``(III) at least 25 percent of the
supply chain of the issuer, by value,
is sourced from China.''.
(b) Investment Adviser Disclosures.--Section 204 of the Investment
Advisers Act of 1940 (15 U.S.C. 80b-4) is amended by adding at the end
the following:
``(g) Report on the Loss of Market Access to China to Private Funds
Advised by a Covered Investment Adviser.--
``(1) In general.--The Commission shall, by rule, require
each covered investment adviser, for each private fund advised
by the covered investment advisor, to disclose to the private
fund and the Commission, every quarter, a plain English report
that outlines the anticipated effects, to the extent it would
be material to investors, of a scenario of the type described
in section 13(t)(2) of the Securities and Exchange Act of 1934
on the returns of such fund.
``(2) Safe harbor.--A covered investment adviser that makes
a disclosure under paragraph (1), if such disclosure is made to
the best of the knowledge of the covered investment adviser
after reasonable investigation and due diligence and consistent
with the fiduciary duty of the covered investment adviser,
shall not be held liable for such disclosure.
``(3) Board of directors certification.--The board of
directors of a covered investment adviser required to make a
disclosure under paragraph (1) shall certify that the board has
reviewed and affirmed the disclosure.
``(4) Covered investment adviser defined.--In this
subsection, the term `covered investment adviser' means an
investment adviser with assets under management of $500,000,000
or more at any point in the previous 365 days.
``(h) Report on Exposure to Covered Foreign Entities.--
``(1) In general.--The Commission shall, by rule, require
each covered investment adviser to disclose to the Commission,
every quarter--
``(A) for each investment company advised by the
covered investment advisor--
``(i) the total exposure of the investment
company to covered foreign entities;
``(ii) a list of each security issued by a
covered foreign entity and held by the
investment company; and
``(iii) the value of each holding;
``(B) the total exposure of all investment
companies advised by the covered investment adviser to
covered foreign entities;
``(C) a list of each security issued by a covered
foreign entity and held by an investment company
advised by the covered investment adviser; and
``(D) the value of each holding identified under
subparagraph (C).
``(2) Definitions.--In this subsection:
``(A) Covered foreign entity.--The term `covered
foreign entity' means a covered entity, as defined
under section 13(t)(5) of the Securities and Exchange
Act of 1934.
``(B) Covered investment adviser.--The term
`covered investment adviser' has the meaning given the
term under subsection (g)(4).''.
(c) Investment Company Disclosures.--Section 30 of the Investment
Company Act of 1940 (15 U.S.C. 80a-29) is amended by adding at the end
the following:
``(l) Report on Exposure to Covered Foreign Entities and Variable
Interest Entities.--
``(1) In general.--The Commission shall, by rule, require
each registered investment company to disclose to the
Commission, every quarter--
``(A) the total exposure of the investment company
to covered foreign entities, including;
``(i) a list of each security issued by a
covered foreign entity and held by the
investment company; and
``(ii) the value of each holding; and
``(B) the total exposure of the investment company
to variable interest entities, including--
``(i) a list of each security issued by a
variable interest entity held by the investment
company; and
``(ii) the value of each holding.
``(2) Covered foreign entity defined.--In this subsection,
the term `covered foreign entity' means a covered entity, as
defined under section 13(t)(5) of the Securities and Exchange
Act of 1934.''.
(d) Variable Interest Entity Exposure.--Section 204(b)(3)(C) of the
Investment Advisers Act of 1940 (15 U.S.C. 80b-4(b)(3)(C)) is amended
by inserting before the semicolon the following: ``, including total
exposure to variable interest entities, a list of each security issued
by a variable interest entity held in the fund, and the value of those
securities''.
(e) No Expansion of Liability.--No provision under the amendments
made by this section requiring the disclosure of information shall give
rise to a claim under the Securities Act of 1933 or the Securities
Exchange Act of 1934 unless the disclosure is both--
(1) false or misleading; and
(2) material to an investment decision such that there is a
substantial likelihood that a reasonable investor would
consider the information important in assessing the risk-
adjusted financial returns from the investment decision.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Financial Services.
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