S. 5643: Protecting U.S. Investors From Chinese Military Companies Act

This bill would require the Securities and Exchange Commission (SEC) to stop trading in the securities of certain companies that are identified by the Department of Defense as Chinese military companies, once those companies have stayed on the list for two annual updates.

What triggers the trading suspension

The bill ties action by the SEC to an existing Defense Department list created under federal law. If a company remains on that list for two yearly revisions, the SEC would have to indefinitely suspend trading in that company’s securities within 10 days of the list update.

What the SEC would have to do

• Identify the securities covered by the trading ban.
• Set up the timing and enforcement of the ban.
• Issue any notices required to Congress.
• Make rules only as needed to carry out the trading suspension.

Congressional notice requirement

If the Treasury Department’s Office of Foreign Assets Control adds one of these companies to the Non-SDN Chinese Military-Industrial Complex Companies List, the SEC must notify the Senate Banking Committee and the House Financial Services Committee within 10 days if it has not suspended trading for that company.

Limits on SEC rulemaking

The bill says the SEC may not use its rulemaking authority to:

• change who gets added to or removed from the relevant government lists;
• create new penalties or requirements beyond what the bill allows;
• expand the trading ban beyond what the bill specifically authorizes; or
• regulate people or transactions beyond what is necessary to enforce the ban or any exception.

Plain-language effect

In practical terms, the bill would create a mandatory market restriction for certain Chinese military-linked companies. Once a company has stayed on the Defense Department’s list long enough, U.S. regulators would have to stop trading its securities, which would limit U.S. investors’ ability to buy or sell those shares in the U.S. market.

Relevant Companies

None found