American Financial Markets Integrity and Security Act

I 116TH CONGRESS 2D SESSION H. R. 8800 To prohibit the trading of the securities of certain Communist Chinese military companies on a national securities exchange, and for other purposes. IN THE HOUSE OF REPRESENTATIVES NOVEMBER 20, 2020 Mr. GALLAGHER (for himself, Ms. CHENEY, and Mr. STEWART) introduced the following bill; which was referred to the Committee on Financial Serv- ices, and in addition to the Committees on Foreign Affairs, Ways and Means, Armed Services, Education and Labor, Intelligence (Permanent Select), and Oversight and Reform, for a period to be subsequently deter- mined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned 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 VerDate Sep 11 2014 23:30 Dec 07, 2020 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H8800.IH H8800 jbell on DSKJLSW7X2PROD with BILLS 2 •HR 8800 IH SEC. 2. PROHIBITIONS RELATING TO CERTAIN COMMUNIST 1 CHINESE MILITARY COMPANIES. 2 (a) DEFINITIONS.—In this section: 3 (1) COMMISSION.—The term ‘‘Commission’’ 4 means the Securities and Exchange Commission. 5 (2) CONTROL.—The term ‘‘control’’ has the 6 meaning given the term in section 2(a) of the Invest- 7 ment Company Act of 1940 (15 U.S.C. 80a–2(a)). 8 (3) COVERED ENTITY.— 9 (A) IN GENERAL.—The term ‘‘covered en- 10 tity’’— 11 (i) means an entity on— 12 (I) the list of Communist Chinese 13 military companies required by section 14 1237(b) of the Strom Thurmond Na- 15 tional Defense Authorization Act for 16 Fiscal Year 1999 (Public Law 105– 17 261; 50 U.S.C. 1701 note); or 18 (II) the entity list maintained by 19 the Bureau of Industry and Security 20 of the Department of Commerce and 21 set forth in Supplement No. 4 to part 22 744 of the title 15, Code of Federal 23 Regulations; and 24 VerDate Sep 11 2014 23:30 Dec 07, 2020 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H8800.IH H8800 jbell on DSKJLSW7X2PROD with BILLS 3 •HR 8800 IH (ii) includes a parent, subsidiary, or 1 affiliate of, or an entity controlled by, an 2 entity described in clause (i). 3 (B) GRACE PERIOD.—For the purposes of 4 this Act, and the amendments made by this 5 Act, an entity shall be considered to be a cov- 6 ered entity beginning on the date that is 1 year 7 after the date on which the entity first qualifies 8 under the applicable provision of subparagraph 9 (A). 10 (4) EXCHANGE; SECURITY.—The terms ‘‘ex- 11 change’’ and ‘‘security’’ have the meanings given 12 those terms in section 3(a) of the Securities Ex- 13 change Act of 1934 (15 U.S.C. 78c(a)). 14 (5) INSURANCE COMPANY.—The term ‘‘insur- 15 ance company’’ has the meaning given the term in 16 section 2(a) of the Investment Company Act of 1940 17 (15 U.S.C. 80a–2(a)). 18 (b) PROHIBITIONS.— 19 (1) LISTING ON EXCHANGE.—Beginning on the 20 date that is 1 year after the date of enactment of 21 this Act, the Commission shall prohibit a covered en- 22 tity from offering to sell or selling securities issued 23 by the covered entity, including pursuant to an ex- 24 VerDate Sep 11 2014 23:30 Dec 07, 2020 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H8800.IH H8800 jbell on DSKJLSW7X2PROD with BILLS 4 •HR 8800 IH emption to section 5 of the Securities Act of 1933 1 (15 U.S.C. 77e). 2 (2) INVESTMENTS; LIMITATION ON ACTIONS.— 3 (A) IN GENERAL.—The Investment Com- 4 pany Act of 1940 (15 U.S.C. 80a–1 et seq.) is 5 amended— 6 (i) in section 12(d) (15 U.S.C. 80a– 7 12(d)), by adding at the end the following: 8 ‘‘(6)(A) It shall be unlawful for any investment 9 company, or any person that would be an investment 10 company but for the application of paragraph (1) or 11 (7) of section 3(c), to invest in a covered entity. 12 ‘‘(B) In this paragraph, the term ‘covered enti- 13 ty’ has the meaning given the term in section 2(a) 14 of the American Financial Markets Integrity and Se- 15 curity Act.’’; and 16 (ii) in section 13(c)(1)— 17 (I) in subparagraph (A), by strik- 18 ing ‘‘or’’ at the end; 19 (II) in subparagraph (B), by 20 striking the period at the end and in- 21 serting ‘‘or’’; and 22 (III) by adding at the end the 23 following: 24 VerDate Sep 11 2014 23:30 Dec 07, 2020 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H8800.IH H8800 jbell on DSKJLSW7X2PROD with BILLS 5 •HR 8800 IH ‘‘(C) are covered entities, as that term is 1 defined in section 12(d)(6)(B).’’. 2 (B) EFFECTIVE DATE.—The amendments 3 made by subparagraph (A) shall take effect on 4 the date that is 1 year after the date of enact- 5 ment of this Act. 6 (3) FEDERAL FUNDS.— 7 (A) IN GENERAL.—Except as provided in 8 subparagraph (B), on and after the date that is 9 180 days after the date of enactment of this 10 Act, no Federal funds may be used to enter 11 into, extend, or renew a contract or purchasing 12 agreement with a covered entity. 13 (B) WAIVER.—The head of a Federal 14 agency may issue a national security waiver to 15 the prohibition in subparagraph (A) for a pe- 16 riod of not more than 2 years with respect to 17 a covered entity if the agency head submits to 18 Congress a notification that includes— 19 (i) a written justification for the waiv- 20 er; and 21 (ii) a plan for a phase-out of the 22 goods or services provided by the covered 23 entity. 24 VerDate Sep 11 2014 23:30 Dec 07, 2020 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H8800.IH H8800 jbell on DSKJLSW7X2PROD with BILLS 6 •HR 8800 IH (4) INVESTMENTS BY INSURANCE COMPA- 1 NIES.— 2 (A) IN GENERAL.—On and after the date 3 of enactment of this Act, an insurance company 4 shall not invest in a covered entity. 5 (B) CERTIFICATION OF COMPLIANCE.— 6 (i) IN GENERAL.—Each insurance 7 company shall, on an annual basis, submit 8 to the Secretary of the Treasury a certifi- 9 cation of compliance with subparagraph 10 (A). 11 (ii) RESPONSIBILITIES OF THE SEC- 12 RETARY.—The Secretary of the Treasury 13 shall create a form for the submission re- 14 quired under clause (i) in such a manner 15 that minimizes the reporting burden on an 16 insurance company making the submission. 17 (C) SHARING INFORMATION.—The Sec- 18 retary of the Treasury, acting through the Fed- 19 eral Insurance Office, shall share the informa- 20 tion received under subparagraph (B) and co- 21 ordinate verification of compliance with State 22 insurance offices. 23 (c) QUALIFIED TRUSTS, ETC.— 24 VerDate Sep 11 2014 23:30 Dec 07, 2020 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H8800.IH H8800 jbell on DSKJLSW7X2PROD with BILLS 7 •HR 8800 IH (1) IN GENERAL.—Subsection (a) of section 1 401 of the Internal Revenue Code of 1986 is amend- 2 ed by inserting after paragraph (38) the following 3 new paragraph: 4 ‘‘(39) PROHIBITED INVESTMENTS.—A trust 5 which is part of a plan shall not be treated as a 6 qualified trust under this subsection unless the plan 7 provides that no part of the plan’s assets will be in- 8 vested in any covered entity (as defined in section 9 12(d)(6)(B) of the Investment Company Act of 10 1940).’’. 11 (2) IRAS.—Paragraph (3) of section 408(a) of 12 such Code is amended by striking ‘‘contracts’’ and 13 inserting ‘‘contracts or in any covered entity (as de- 14 fined in section 12(d)(6)(B) of the Investment Com- 15 pany Act of 1940’’. 16 (3) FIDUCIARY DUTY.—Section 404 of the Em- 17 ployee Retirement Income Security Act of 1974 (29 18 U.S.C. 1104) is amended by adding at the end the 19 following new subsection: 20 ‘‘(f) PROHIBITED INVESTMENTS.—No fiduciary shall 21 cause any assets of a plan to be invested in any covered 22 entity (as defined in section 12(d)(6)(B) of the Investment 23 Company Act of 1940 (15 U.S.C. 80a–12(d)(6)(B))).’’. 24 (4) EFFECTIVE DATE.— 25 VerDate Sep 11 2014 23:30 Dec 07, 2020 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H8800.IH H8800 jbell on DSKJLSW7X2PROD with BILLS 8 •HR 8800 IH (A) IN GENERAL.—Except as provided in 1 subparagraph (B), the amendments made by 2 this subsection shall apply to plan years begin- 3 ning after the date which is 180 days after the 4 date of the enactment of this Act. 5 (B) PLAN AMENDMENTS.—If subpara- 6 graph (C) applies to any retirement plan or 7 contract amendment— 8 (i) such plan or contract shall not fail 9 to be treated as being operated in accord- 10 ance with the terms of the plan during the 11 period described in subparagraph (C)(ii) 12 solely because the plan operates in accord- 13 ance with the amendments made by this 14 subsection; and 15 (ii) except as provided by the Sec- 16 retary of the Treasury (or the Secretary’s 17 delegate), such plan or contract shall not 18 fail to meet the any requirements of the 19 Internal Revenue Code of 1986 or the Em- 20 ployee Retirement Income Security Act of 21 1974 by reason of such amendment. 22 (C) AMENDMENTS TO WHICH PARAGRAPH 23 APPLIES.— 24 VerDate Sep 11 2014 23:30 Dec 07, 2020 Jkt 019200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H8800.IH H8800 jbell on DSKJLSW7X2PROD with BILLS 9 •HR 8800 IH (i) IN GENERAL.—This subparagraph 1 shall apply to any amendment to any plan 2 or annuity contract which— 3 (I) is made pursuant to the pro- 4 visions of this section; and 5 (II) is made on or before the last 6 day of the first plan year beginning 7 on or after the date which is 2 years 8 after the date of the enactment of this 9 Act (4 years after such date of enact- 10 ment, in the case of a governmental 11 plan). 12 (ii) CONDITIONS.—This subparagraph 13 shall not apply to any amendment unless— 14 (I) during the period beginning 15 on the date which is 180 days after 16 the date of the enactment of this Act, 17 and ending on the date described in 18 subclause (I)(bb) (or, if earlier, the 19 date the plan or contract amendment 20 is adopted), the plan or contract is op- 21 erated as if such plan or contract 22 amendment were in effect; and 23 VerDate Sep 11 2014 23:30 Dec 07, 2020 Jkt 019200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H8800.IH H8800 jbell on DSKJLSW7X2PROD with BILLS 10 •HR 8800 IH (II) such plan or contract amend- 1 ment applies retroactively for such pe- 2 riod. 3 (D) SUBSEQUENT AMENDMENTS.—Rules 4 similar to the rules of subparagraphs (B) and 5 (C) shall apply in the case of any amendment 6 to any plan or annuity contract made pursuant 7 to any update of the list of Communist Chinese 8 military companies required by section 1237(b) 9 of the Strom Thurmond National Defense Au- 10 thorization Act for Fiscal Year 1999 (Public 11 Law 105–261; 50 U.S.C. 1701 note) which is 12 made after the effective date of the amend- 13 ments made by this subsection. 14 SEC. 3. MODIFICATION OF REQUIREMENTS FOR LIST OF 15 COMMUNIST CHINESE MILITARY COMPANIES. 16 Section 1237(b) of the Strom Thurmond National 17 Defense Authorization Act for Fiscal Year 1999 (Public 18 Law 105–261; 50 U.S.C. 1701 note) is amended— 19 (1) by striking paragraph (2) and inserting the 20 following: 21 ‘‘(2) REVISIONS TO THE LIST.— 22 ‘‘(A) ADDITIONS.—The Secretary of De- 23 fense, the Secretary of Commerce, or the Direc- 24 tor of National Intelligence may add a person 25 VerDate Sep 11 2014 23:30 Dec 07, 2020 Jkt 019200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H8800.IH H8800 jbell on DSKJLSW7X2PROD with BILLS 11 •HR 8800 IH to the list required by paragraph (1) at any 1 time. 2 ‘‘(B) REMOVALS.—A person may be re- 3 moved from the list required by paragraph (1) 4 if the Secretary of Defense, the Secretary of 5 Commerce, and the Director of National Intel- 6 ligence agree to remove the person from the 7 list. 8 ‘‘(C) SUBMISSION OF UPDATES TO CON- 9 GRESS.—Not later than February 1 of each 10 year, the Secretary of Defense shall submit a 11 version of the list required paragraph (1), up- 12 dated to include any additions or removals 13 under this paragraph, to the committees and of- 14 ficers specified in paragraph (1).’’; 15 (2) by striking paragraph (3) and inserting the 16 following: 17 ‘‘(3) CONSULTATION.—In carrying out para- 18 graphs (1) and (2), the Secretary of Defense, the 19 Secretary of Commerce, and the Director of Na- 20 tional Intelligence shall consult with each other, the 21 Attorney General, and the Director of the Federal 22 Bureau of Investigation.’’; and 23 (3) in paragraph (4), by striking ‘‘making the 24 determination required by paragraph (1) and of car- 25 VerDate Sep 11 2014 23:30 Dec 07, 2020 Jkt 019200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H8800.IH H8800 jbell on DSKJLSW7X2PROD with BILLS 12 •HR 8800 IH rying out paragraph (2)’’ and inserting ‘‘this sec- 1 tion’’. 2 SEC. 4. ANALYSIS OF FINANCIAL AMBITIONS OF THE GOV- 3 ERNMENT OF THE PEOPLE’S REPUBLIC OF 4 CHINA. 5 (a) ANALYSIS REQUIRED.—The Director of the Of- 6 fice of Commercial and Economic Analysis of the Air 7 Force shall conduct an analysis of— 8 (1) the strategic importance to the Government 9 of the People’s Republic of China of inflows of 10 United States dollars through capital markets to the 11 People’s Republic of China; 12 (2) the methods by which that Government 13 seeks to manage such inflows; 14 (3) how the inclusion of the securities of Chi- 15 nese entities in stock or bond indexes affects such 16 inflows and serves the financial ambitions of that 17 Government; and 18 (4) how the listing of the securities of Chinese 19 entities on exchanges in the United States assists 20 in— 21 (A) meeting the strategic goals of that 22 Government, including defense, surveillance, 23 and intelligence goals; and 24 VerDate Sep 11 2014 23:30 Dec 07, 2020 Jkt 019200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\H8800.IH H8800 jbell on DSKJLSW7X2PROD with BILLS 13 •HR 8800 IH (B) the fusion of the civilian and military 1 components of that Government. 2 (b) SUBMISSION TO CONGRESS.—The Director of the 3 Office of Commercial and Economic Analysis of the Air 4 Force shall submit to Congress a report— 5 (1) setting forth the results of the analysis con- 6 ducted under subsection (a); and 7 (2) based on that analysis, making rec- 8 ommendations for best practices to mitigate any na- 9 tional security and economic risks to the United 10 States relating to the financial ambitions of the Gov- 11 ernment of the People’s Republic of China. 12 Æ VerDate Sep 11 2014 23:30 Dec 07, 2020 Jkt 019200 PO 00000 Frm 00013 Fmt 6652 Sfmt 6301 E:\BILLS\H8800.IH H8800 jbell on DSKJLSW7X2PROD with BILLS