American Financial Markets Integrity and Security Act

II 116TH CONGRESS 2D SESSION S. 4872 To prohibit the trading of the securities of certain Communist Chinese military companies on a national securities exchange, and for other purposes. IN THE SENATE OF THE UNITED STATES OCTOBER 26 (legislative day, OCTOBER 19), 2020 Mr. RUBIO introduced the following bill; which was read twice and referred to the Committee on Finance A BILL To prohibit the trading of the securities of certain Com- munist Chinese military companies on a national securi- ties exchange, and for other purposes. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘American Financial 4 Markets Integrity and Security Act’’. 5 SEC. 2. PROHIBITIONS RELATING TO CERTAIN COMMUNIST 6 CHINESE MILITARY COMPANIES. 7 (a) DEFINITIONS.—In this section: 8 (1) COMMISSION.—The term ‘‘Commission’’ 9 means the Securities and Exchange Commission. 10 VerDate Sep 11 2014 19:03 Nov 04, 2020 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S4872.IS S4872 pamtmann on DSKBC07HB2PROD with BILLS 2 •S 4872 IS (2) CONTROL.—The term ‘‘control’’ has the 1 meaning given the term in section 2(a) of the Invest- 2 ment Company Act of 1940 (15 U.S.C. 80a–2(a)). 3 (3) COVERED ENTITY.— 4 (A) IN GENERAL.—The term ‘‘covered en- 5 tity’’— 6 (i) means an entity on— 7 (I) the list of Communist Chinese 8 military companies required by section 9 1237(b) of the Strom Thurmond Na- 10 tional Defense Authorization Act for 11 Fiscal Year 1999 (Public Law 105– 12 261; 50 U.S.C. 1701 note); or 13 (II) the entity list maintained by 14 the Bureau of Industry and Security 15 of the Department of Commerce and 16 set forth in Supplement No. 4 to part 17 744 of the title 15, Code of Federal 18 Regulations; and 19 (ii) includes a parent, subsidiary, or 20 affiliate of, or an entity controlled by, an 21 entity described in clause (i). 22 (B) GRACE PERIOD.—For the purposes of 23 this Act, and the amendments made by this 24 Act, an entity shall be considered to be a cov- 25 VerDate Sep 11 2014 19:03 Nov 04, 2020 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S4872.IS S4872 pamtmann on DSKBC07HB2PROD with BILLS 3 •S 4872 IS ered entity beginning on the date that is 1 year 1 after the date on which the entity first qualifies 2 under the applicable provision of subparagraph 3 (A). 4 (4) EXCHANGE; SECURITY.—The terms ‘‘ex- 5 change’’ and ‘‘security’’ have the meanings given 6 those terms in section 3(a) of the Securities Ex- 7 change Act of 1934 (15 U.S.C. 78c(a)). 8 (5) INSURANCE COMPANY.—The term ‘‘insur- 9 ance company’’ has the meaning given the term in 10 section 2(a) of the Investment Company Act of 1940 11 (15 U.S.C. 80a–2(a)). 12 (b) PROHIBITIONS.— 13 (1) LISTING ON EXCHANGE.—Beginning on the 14 date that is 1 year after the date of enactment of 15 this Act, the Commission shall prohibit a covered en- 16 tity from offering to sell or selling securities issued 17 by the covered entity, including pursuant to an ex- 18 emption to section 5 of the Securities Act of 1933 19 (15 U.S.C. 77e). 20 (2) INVESTMENTS; LIMITATION ON ACTIONS.— 21 (A) IN GENERAL.—The Investment Com- 22 pany Act of 1940 (15 U.S.C. 80a–1 et seq.) is 23 amended— 24 VerDate Sep 11 2014 19:03 Nov 04, 2020 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S4872.IS S4872 pamtmann on DSKBC07HB2PROD with BILLS 4 •S 4872 IS (i) in section 12(d) (15 U.S.C. 80a– 1 12(d)), by adding at the end the following: 2 ‘‘(6)(A) It shall be unlawful for any investment 3 company, or any person that would be an investment 4 company but for the application of paragraph (1) or 5 (7) of section 3(c), to invest in a covered entity. 6 ‘‘(B) In this paragraph, the term ‘covered enti- 7 ty’ has the meaning given the term in section 2(a) 8 of the American Financial Markets Integrity and Se- 9 curity Act.’’; and 10 (ii) in section 13(c)(1)— 11 (I) in subparagraph (A), by strik- 12 ing ‘‘or’’ at the end; 13 (II) in subparagraph (B), by 14 striking the period at the end and in- 15 serting ‘‘or’’; and 16 (III) by adding at the end the 17 following: 18 ‘‘(C) are covered entities, as that term is 19 defined in section 12(d)(6)(B).’’. 20 (B) EFFECTIVE DATE.—The amendments 21 made by subparagraph (A) shall take effect on 22 the date that is 1 year after the date of enact- 23 ment of this Act. 24 (3) FEDERAL FUNDS.— 25 VerDate Sep 11 2014 19:03 Nov 04, 2020 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S4872.IS S4872 pamtmann on DSKBC07HB2PROD with BILLS 5 •S 4872 IS (A) IN GENERAL.—Except as provided in 1 subparagraph (B), on and after the date that is 2 180 days after the date of enactment of this 3 Act, no Federal funds may be used to enter 4 into, extend, or renew a contract or purchasing 5 agreement with a covered entity. 6 (B) WAIVER.—The head of a Federal 7 agency may issue a national security waiver to 8 the prohibition in subparagraph (A) for a pe- 9 riod of not more than 2 years with respect to 10 a covered entity if the agency head submits to 11 Congress a notification that includes— 12 (i) a written justification for the waiv- 13 er; and 14 (ii) a plan for a phase-out of the 15 goods or services provided by the covered 16 entity. 17 (4) INVESTMENTS BY INSURANCE COMPA- 18 NIES.— 19 (A) IN GENERAL.—On and after the date 20 of enactment of this Act, an insurance company 21 shall not invest in a covered entity. 22 (B) CERTIFICATION OF COMPLIANCE.— 23 (i) IN GENERAL.—Each insurance 24 company shall, on an annual basis, submit 25 VerDate Sep 11 2014 19:03 Nov 04, 2020 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S4872.IS S4872 pamtmann on DSKBC07HB2PROD with BILLS 6 •S 4872 IS to the Secretary of the Treasury a certifi- 1 cation of compliance with subparagraph 2 (A). 3 (ii) RESPONSIBILITIES OF THE SEC- 4 RETARY.—The Secretary of the Treasury 5 shall create a form for the submission re- 6 quired under clause (i) in such a manner 7 that minimizes the reporting burden on an 8 insurance company making the submission. 9 (C) SHARING INFORMATION.—The Sec- 10 retary of the Treasury, acting through the Fed- 11 eral Insurance Office, shall share the informa- 12 tion received under subparagraph (B) and co- 13 ordinate verification of compliance with State 14 insurance offices. 15 (c) QUALIFIED TRUSTS, ETC.— 16 (1) IN GENERAL.—Subsection (a) of section 17 401 of the Internal Revenue Code of 1986 is amend- 18 ed by inserting after paragraph (38) the following 19 new paragraph: 20 ‘‘(39) PROHIBITED INVESTMENTS.—A trust 21 which is part of a plan shall not be treated as a 22 qualified trust under this subsection unless the plan 23 provides that no part of the plan’s assets will be in- 24 vested in any covered entity (as defined in section 25 VerDate Sep 11 2014 19:03 Nov 04, 2020 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S4872.IS S4872 pamtmann on DSKBC07HB2PROD with BILLS 7 •S 4872 IS 12(d)(6)(B) of the Investment Company Act of 1 1940).’’. 2 (2) IRAS.—Paragraph (3) of section 408(a) of 3 such Code is amended by striking ‘‘contracts’’ and 4 inserting ‘‘contracts or in any covered entity (as de- 5 fined in section 12(d)(6)(B) of the Investment Com- 6 pany Act of 1940’’. 7 (3) FIDUCIARY DUTY.—Section 404 of the Em- 8 ployee Retirement Income Security Act of 1974 (29 9 U.S.C. 1104) is amended by adding at the end the 10 following new subsection: 11 ‘‘(f) PROHIBITED INVESTMENTS.—No fiduciary shall 12 cause any assets of a plan to be invested in any covered 13 entity (as defined in section 12(d)(6)(B) of the Investment 14 Company Act of 1940 (15 U.S.C. 80a–12(d)(6)(B))).’’. 15 (4) EFFECTIVE DATE.— 16 (A) IN GENERAL.—Except as provided in 17 subparagraph (B), the amendments made by 18 this subsection shall apply to plan years begin- 19 ning after the date which is 180 days after the 20 date of the enactment of this Act. 21 (B) PLAN AMENDMENTS.—If subpara- 22 graph (C) applies to any retirement plan or 23 contract amendment— 24 VerDate Sep 11 2014 22:04 Nov 04, 2020 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S4872.IS S4872 pamtmann on DSKBC07HB2PROD with BILLS 8 •S 4872 IS (i) such plan or contract shall not fail 1 to be treated as being operated in accord- 2 ance with the terms of the plan during the 3 period described in subparagraph (C)(ii) 4 solely because the plan operates in accord- 5 ance with the amendments made by this 6 subsection, and 7 (ii) except as provided by the Sec- 8 retary of the Treasury (or the Secretary’s 9 delegate), such plan or contract shall not 10 fail to meet the requirements of the Inter- 11 nal Revenue Code of 1986 or the Employee 12 Retirement Income Security Act of 1974 13 by reason of such amendment. 14 (C) AMENDMENTS TO WHICH PARAGRAPH 15 APPLIES.— 16 (i) IN GENERAL.—This subparagraph 17 shall apply to any amendment to any plan 18 or annuity contract which— 19 (I) is made pursuant to the pro- 20 visions of this section, and 21 (II) is made on or before the last 22 day of the first plan year beginning 23 on or after the date which is 2 years 24 after the date of the enactment of this 25 VerDate Sep 11 2014 19:11 Nov 06, 2020 Jkt 019200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S4872.IS S4872 pamtmann on DSKBC07HB2PROD with BILLS 9 •S 4872 IS Act (4 years after such date of enact- 1 ment, in the case of a governmental 2 plan). 3 (ii) CONDITIONS.—This subparagraph 4 shall not apply to any amendment unless— 5 (I) during the period beginning 6 on the date which is 180 days after 7 the date of the enactment of this Act, 8 and ending on the date described in 9 subclause (I)(bb) (or, if earlier, the 10 date the plan or contract amendment 11 is adopted), the plan or contract is op- 12 erated as if such plan or contract 13 amendment were in effect, and 14 (II) such plan or contract amend- 15 ment applies retroactively for such pe- 16 riod. 17 (D) SUBSEQUENT AMENDMENTS.—Rules 18 similar to the rules of subparagraphs (B) and 19 (C) shall apply in the case of any amendment 20 to any plan or annuity contract made pursuant 21 to any update of the list of Communist Chinese 22 military companies required by section 1237(b) 23 of the Strom Thurmond National Defense Au- 24 thorization Act for Fiscal Year 1999 (Public 25 VerDate Sep 11 2014 19:03 Nov 04, 2020 Jkt 019200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S4872.IS S4872 pamtmann on DSKBC07HB2PROD with BILLS 10 •S 4872 IS Law 105–261; 50 U.S.C. 1701 note) which is 1 made after the effective date of the amend- 2 ments made by this subsection. 3 SEC. 3. MODIFICATION OF REQUIREMENTS FOR LIST OF 4 COMMUNIST CHINESE MILITARY COMPANIES. 5 Section 1237(b) of the Strom Thurmond National 6 Defense Authorization Act for Fiscal Year 1999 (Public 7 Law 105–261; 50 U.S.C. 1701 note) is amended— 8 (1) by striking paragraph (2) and inserting the 9 following: 10 ‘‘(2) REVISIONS TO THE LIST.— 11 ‘‘(A) ADDITIONS.—The Secretary of De- 12 fense, the Secretary of Commerce, or the Direc- 13 tor of National Intelligence may add a person 14 to the list required by paragraph (1) at any 15 time. 16 ‘‘(B) REMOVALS.—A person may be re- 17 moved from the list required by paragraph (1) 18 if the Secretary of Defense, the Secretary of 19 Commerce, and the Director of National Intel- 20 ligence agree to remove the person from the 21 list. 22 ‘‘(C) SUBMISSION OF UPDATES TO CON- 23 GRESS.—Not later than February 1 of each 24 year, the Secretary of Defense shall submit a 25 VerDate Sep 11 2014 19:03 Nov 04, 2020 Jkt 019200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S4872.IS S4872 pamtmann on DSKBC07HB2PROD with BILLS 11 •S 4872 IS version of the list required in paragraph (1), 1 updated to include any additions or removals 2 under this paragraph, to the committees and of- 3 ficers specified in paragraph (1).’’; 4 (2) by striking paragraph (3) and inserting the 5 following: 6 ‘‘(3) CONSULTATION.—In carrying out para- 7 graphs (1) and (2), the Secretary of Defense, the 8 Secretary of Commerce, and the Director of Na- 9 tional Intelligence shall consult with each other, the 10 Attorney General, and the Director of the Federal 11 Bureau of Investigation.’’; and 12 (3) in paragraph (4), by striking ‘‘making the 13 determination required by paragraph (1) and of car- 14 rying out paragraph (2)’’ and inserting ‘‘this sec- 15 tion’’. 16 SEC. 4. ANALYSIS OF FINANCIAL AMBITIONS OF THE GOV- 17 ERNMENT OF THE PEOPLE’S REPUBLIC OF 18 CHINA. 19 (a) ANALYSIS REQUIRED.—The Director of the Of- 20 fice of Commercial and Economic Analysis of the Air 21 Force shall conduct an analysis of— 22 (1) the strategic importance to the Government 23 of the People’s Republic of China of inflows of 24 VerDate Sep 11 2014 19:11 Nov 06, 2020 Jkt 019200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S4872.IS S4872 pamtmann on DSKBC07HB2PROD with BILLS 12 •S 4872 IS United States dollars through capital markets to the 1 People’s Republic of China; 2 (2) the methods by which that Government 3 seeks to manage such inflows; 4 (3) how the inclusion of the securities of Chi- 5 nese entities in stock or bond indexes affects such 6 inflows and serves the financial ambitions of that 7 Government; and 8 (4) how the listing of the securities of Chinese 9 entities on exchanges in the United States assists 10 in— 11 (A) meeting the strategic goals of that 12 Government, including defense, surveillance, 13 and intelligence goals; and 14 (B) the fusion of the civilian and military 15 components of that Government. 16 (b) SUBMISSION TO CONGRESS.—The Director of the 17 Office of Commercial and Economic Analysis of the Air 18 Force shall submit to Congress a report— 19 (1) setting forth the results of the analysis con- 20 ducted under subsection (a); and 21 (2) based on that analysis, making rec- 22 ommendations for best practices to mitigate any na- 23 tional security and economic risks to the United 24 VerDate Sep 11 2014 19:03 Nov 04, 2020 Jkt 019200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\S4872.IS S4872 pamtmann on DSKBC07HB2PROD with BILLS 13 •S 4872 IS States relating to the financial ambitions of the Gov- 1 ernment of the People’s Republic of China. 2 Æ VerDate Sep 11 2014 19:03 Nov 04, 2020 Jkt 019200 PO 00000 Frm 00013 Fmt 6652 Sfmt 6301 E:\BILLS\S4872.IS S4872 pamtmann on DSKBC07HB2PROD with BILLS