SEC Under Bipartisan Pressure To Curb 'Opaque' Chinese Firms' Access To US Capital Markets

U.S. lawmakers have urged the Securities and Exchange Commission (SEC) to limit Chinese companies’ access to American capital markets, citing potential national security threats and risks to market integrity. A bipartisan group of senators, spearheaded by Republican Senate Banking Committee chair Tim Scott (R-S.C.) and his Democratic counterpart Elizabeth Warren (D-Mass.), penned a letter to SEC Chair Paul Atkins on Thursday. The senators voiced concerns regarding the “unique risks to national security, market integrity, and investor protection posed by SEC-registered entities with ties to the People's Republic of China”. The lawmakers highlighted the use of variable interest entities (VIE), a type of “opaque corporate structure,” by Chinese firms that bypass foreign ownership rules, warning they could advance Chinese government interests while threatening investor protection and market fairness. All 13 Republican committee members, along with Democrats Warren, Lisa Blunt Rochester, Chris Van Hollen, Raphael Warnock, and Andy Kim, jointly signed the letter. Previous Delisting Call This development follows previous calls by U.S. lawmakers to delist Chinese companies from American stock exchanges. In May, Rep. John Moolenaar, chair of the House China committee, and Sen. Rick Scott, chair of the Senate committee on Aging, urged Atkins to scrutinize China-based firms, claiming they leverage U.S. investor capital to support the strategic goals of the Chinese Communist Party (CCP). They called on the SEC to delist top Chinese companies, including Alibaba Group Holding Ltd. (NYSE:BABA), Baidu, Inc. (NASDAQ:BIDU), JD.com, Inc. (NASDAQ:JD), Hesai Group (NASDAQ:HSAI), BilliBili, Inc. (NASDAQ:BILI), XPeng, Inc. (NYSE:XPEV), and Weibo Corp. (NASDAQ:WB). The complete list included 25 Chinese firms listed on U.S. stock exchanges. SEC Flags Risks In China VIEs Exposure The SEC's Office of the Investor Advocate said in its latest report that it would focus on risks from China-based variable interest entities (VIE), given rising exposure of U.S. investors to this structure. In December, Atkins told Fox News that the SEC has paused trading in nearly a dozen Chinese companies suspected of manipulative practices, emphasizing the need for strict compliance with U.S. laws and access to auditing Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by a Benzinga editor. Image via Shutterstock