What This Bill Does
This bill prevents certain Chinese military companies from selling their stocks and bonds on U.S. financial markets. It also stops federal agencies, insurance companies, retirement plans and investment funds from buying securities (financial investments) issued by these companies.
##
Who It Affects
Chinese military companies on federal government lists; investment companies and insurance companies; federal agencies that use taxpayer money; people with retirement accounts and pension plans; stock exchanges and over-the-counter securities traders.
##
Key Provisions
* The Securities and Exchange Commission must prohibit covered entities (certain Chinese military companies) from offering or selling their securities on U.S. exchanges or through over-the-counter trading starting one year after the law takes effect (Sec. 2(b)(1))
* Investment companies and funds cannot invest in covered entities beginning one year after the law takes effect (Sec. 2(b)(2))
* Federal agencies cannot use taxpayer money to buy goods or services from covered entities starting 180 days after the law takes effect, though agency heads can issue national security waivers lasting up to two years if they notify Congress (Sec. 2(b)(3))
* Insurance companies cannot invest in covered entities and must certify compliance yearly to the Treasury Secretary (Sec. 2(b)(4))
* Retirement plans, IRAs and pension plans cannot invest in covered entities (Sec. 2(c))
##
What Changes
If this becomes law, covered entities will be blocked from selling securities on U.S. stock exchanges. Federal agencies and insurance companies will need to stop investing in these companies. Retirement accounts and pension plans will be prohibited from holding their securities. The government will maintain lists of affected companies and update them yearly.
##
Important Definitions
"Covered entity" means any Chinese military company on specific federal government lists including the Treasury Department's specially designated nationals list, the Chinese Military-Industrial Complex Companies List, or the Defense Department's list of Chinese military companies. It also includes any parent company, subsidiary, affiliate or controlled entity of these companies.
##
Effective Date
Different provisions take effect at different times: some provisions take effect 180 days after enactment, others take effect one year after enactment. (Sec. 2(b)(1), 2(b)(2), 2(b)(3), 2(c)(4))
II
118TH CONGRESS
1ST SESSION
S. 152
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
JANUARY 30, 2023
Mr. RUBIO (for himself, Mr. YOUNG, and Mr. BRAUN) 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
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•S 152 IS
(2) CONTROL;
INSURANCE
COMPANY.—The
1
terms ‘‘control’’ and ‘‘insurance company’’ have the
2
meanings given the terms in section 2(a) of the In-
3
vestment Company Act of 1940 (15 U.S.C. 80a–
4
2(a)).
5
(3) COVERED ENTITY.—
6
(A) IN GENERAL.—The term ‘‘covered en-
7
tity’’ means any of the following:
8
(i) An entity on the list of specially
9
designated nationals and blocked persons
10
maintained by the Office of Foreign Assets
11
Control of the Department of the Treasury
12
(commonly referred to as the ‘‘SDN list’’).
13
(ii) An entity on the Non-SDN Chi-
14
nese Military-Industrial Complex Compa-
15
nies List—
16
(I) established pursuant to Exec-
17
utive Order 13959 (50 U.S.C. 1701
18
note; relating to addressing the threat
19
from securities investments that fi-
20
nance Communist Chinese military
21
companies), as amended before, on, or
22
after the date of enactment of this
23
Act; and
24
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•S 152 IS
(II) maintained by the Office of
1
Foreign Assets Control of the Depart-
2
ment of the Treasury.
3
(iii) A Chinese military company on
4
the list required under section 1260H of
5
the William M. (Mac) Thornberry National
6
Defense Authorization Act for Fiscal Year
7
2021 (Public Law 116–283; 10 U.S.C. 113
8
note).
9
(iv) An entity on the entity list main-
10
tained by the Bureau of Industry and Se-
11
curity of the Department of Commerce and
12
set forth in Supplement No. 4 to part 744
13
of title 15, Code of Federal Regulations.
14
(v) Any entity that is a parent, sub-
15
sidiary, or affiliate of, or an entity con-
16
trolled by, an entity described in any of
17
clauses (i) through (iv).
18
(B) GRACE PERIOD.—For the purposes of
19
this Act and the amendments made by this Act,
20
an entity shall be considered to be a covered en-
21
tity beginning on the date that is 1 year after
22
the date on which the entity first qualifies
23
under the applicable provision of subparagraph
24
(A).
25
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(4) EXCHANGE; SECURITY.—The terms ‘‘ex-
1
change’’ and ‘‘security’’ have the meanings given
2
those terms in section 3(a) of the Securities Ex-
3
change Act of 1934 (15 U.S.C. 78c(a)).
4
(b) PROHIBITIONS.—
5
(1) LISTING ON EXCHANGE.—Beginning on the
6
date that is 1 year after the date of enactment of
7
this Act, the Commission shall prohibit a covered en-
8
tity from offering to sell or selling on an exchange
9
(or through any other method that is within the ju-
10
risdiction of the Commission to regulate, including
11
through the method of trading that is commonly re-
12
ferred to as the ‘‘over-the-counter’’ trading of securi-
13
ties) securities issued by the covered entity, includ-
14
ing pursuant to an exemption to section 5 of the Se-
15
curities Act of 1933 (15 U.S.C. 77e).
16
(2) INVESTMENTS; LIMITATION ON ACTIONS.—
17
(A) IN GENERAL.—The Investment Com-
18
pany Act of 1940 (15 U.S.C. 80a–1 et seq.) is
19
amended—
20
(i) in section 12(d) (15 U.S.C. 80a–
21
12(d)), by adding at the end the following:
22
‘‘(4)(A) It shall be unlawful for any investment
23
company, or any person that would be an investment
24
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•S 152 IS
company but for the application of paragraph (1) or
1
(7) of section 3(c), to invest in a covered entity.
2
‘‘(B) In this paragraph, the term ‘covered enti-
3
ty’ has the meaning given the term in section 2(a)
4
of the American Financial Markets Integrity and Se-
5
curity Act.’’; and
6
(ii) in section 13(c)(1) (15 U.S.C.
7
80a–13(c)(1))—
8
(I) in subparagraph (A), by strik-
9
ing ‘‘or’’ at the end;
10
(II) in subparagraph (B), by
11
striking the period at the end and in-
12
serting ‘‘or’’; and
13
(III) by adding at the end the
14
following:
15
‘‘(C) are covered entities, as that term is
16
defined in section 12(d)(4)(B).’’.
17
(B) EFFECTIVE DATE.—The amendments
18
made by subparagraph (A) shall take effect on
19
the date that is 1 year after the date of enact-
20
ment of this Act.
21
(3) FEDERAL FUNDS.—
22
(A) IN GENERAL.—Except as provided in
23
subparagraph (B), on and after the date that is
24
180 days after the date of enactment of this
25
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•S 152 IS
Act, no Federal funds may be used to enter
1
into, extend, or renew a contract or purchasing
2
agreement with a covered entity.
3
(B) WAIVER.—The head of a Federal
4
agency may issue a national security waiver to
5
the prohibition in subparagraph (A) for a pe-
6
riod of not more than 2 years with respect to
7
a covered entity if the agency head submits to
8
Congress a notification that includes—
9
(i) a written justification for the waiv-
10
er; and
11
(ii) a plan for a phase-out of the
12
goods or services provided by the covered
13
entity.
14
(4) INVESTMENTS
BY
INSURANCE
COMPA-
15
NIES.—
16
(A) IN GENERAL.—On and after the date
17
of enactment of this Act, an insurance company
18
may not invest in a covered entity.
19
(B) CERTIFICATION OF COMPLIANCE.—
20
(i) IN
GENERAL.—Each insurance
21
company shall, on an annual basis, submit
22
to the Secretary of the Treasury a certifi-
23
cation of compliance with subparagraph
24
(A).
25
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•S 152 IS
(ii) RESPONSIBILITIES OF THE SEC-
1
RETARY.—The Secretary of the Treasury
2
shall create a form for the submission re-
3
quired under clause (i) in such a manner
4
that minimizes the reporting burden on an
5
insurance company making the submission.
6
(C) SHARING
INFORMATION.—The Sec-
7
retary of the Treasury, acting through the Fed-
8
eral Insurance Office, shall share the informa-
9
tion received under subparagraph (B) and co-
10
ordinate verification of compliance with State
11
insurance offices.
12
(c) QUALIFIED TRUSTS, ETC.—
13
(1) IN
GENERAL.—Subsection (a) of section
14
401 of the Internal Revenue Code of 1986 is amend-
15
ed by inserting after paragraph (39) the following
16
new paragraph:
17
‘‘(40) PROHIBITED
INVESTMENTS.—A trust
18
which is part of a plan shall not be treated as a
19
qualified trust under this subsection unless the plan
20
provides that no part of the plan’s assets will be in-
21
vested in any covered entity (as defined in section
22
12(d)(4)(B) of the Investment Company Act of
23
1940).’’.
24
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•S 152 IS
(2) IRAS.—Paragraph (3) of section 408(a) of
1
such Code is amended by striking ‘‘contracts’’ and
2
inserting ‘‘contracts or in any covered entity (as de-
3
fined in section 12(d)(6)(B) of the Investment Com-
4
pany Act of 1940)’’.
5
(3) FIDUCIARY DUTY.—Section 404 of the Em-
6
ployee Retirement Income Security Act of 1974 (29
7
U.S.C. 1104) is amended by adding at the end the
8
following new subsection:
9
‘‘(f) PROHIBITED INVESTMENTS.—No fiduciary shall
10
cause any assets of a plan to be invested in any covered
11
entity (as defined in section 12(d)(4)(B) of the Investment
12
Company Act of 1940 (15 U.S.C. 80a–12(d)(4)(B))).’’.
13
(4) EFFECTIVE DATE.—
14
(A) IN GENERAL.—Except as provided in
15
subparagraph (B), the amendments made by
16
this subsection shall apply to plan years begin-
17
ning after the date which is 180 days after the
18
date of the enactment of this Act.
19
(B) PLAN
AMENDMENTS.—If subpara-
20
graph (C) applies to any retirement plan or
21
contract amendment—
22
(i) such plan or contract shall not fail
23
to be treated as being operated in accord-
24
ance with the terms of the plan during the
25
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•S 152 IS
period described in subparagraph (C)(ii)
1
solely because the plan operates in accord-
2
ance with the amendments made by this
3
subsection, and
4
(ii) except as provided by the Sec-
5
retary of the Treasury (or the Secretary’s
6
delegate), such plan or contract shall not
7
fail to meet the requirements of the Inter-
8
nal Revenue Code of 1986 or the Employee
9
Retirement Income Security Act of 1974
10
by reason of such amendment.
11
(C) AMENDMENTS TO WHICH PARAGRAPH
12
APPLIES.—
13
(i) IN
GENERAL.—This paragraph
14
shall apply to any amendment to any plan
15
or annuity contract which—
16
(I) is made pursuant to the pro-
17
visions of this section, and
18
(II) is made on or before the last
19
day of the first plan year beginning
20
on or after the date which is 2 years
21
after the date of the enactment of this
22
Act (4 years after such date of enact-
23
ment, in the case of a governmental
24
plan).
25
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•S 152 IS
(ii)
CONDITIONS.—This
paragraph
1
shall not apply to any amendment unless—
2
(I) during the period beginning
3
on the date which is 180 days after
4
the date of the enactment of this Act,
5
and ending on the date described in
6
clause (i)(II) (or, if earlier, the date
7
the plan or contract amendment is
8
adopted), the plan or contract is oper-
9
ated as if such plan or contract
10
amendment were in effect, and
11
(II) such plan or contract amend-
12
ment applies retroactively for such pe-
13
riod.
14
(D) SUBSEQUENT
AMENDMENTS.—Rules
15
similar to the rules of subparagraphs (B) and
16
(C) shall apply in the case of any amendment
17
to any plan or annuity contract made pursuant
18
to any update of the list of Communist Chinese
19
military companies required by section 1237(b)
20
of the Strom Thurmond National Defense Au-
21
thorization Act for Fiscal Year 1999 (Public
22
Law 105–261; 50 U.S.C. 1701 note) which is
23
made after the effective date of the amend-
24
ments made by this subsection.
25
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SEC. 3. MODIFICATION OF REQUIREMENTS FOR LIST OF
1
COMMUNIST CHINESE MILITARY COMPANIES.
2
Section 1237(b) of the Strom Thurmond National
3
Defense Authorization Act for Fiscal Year 1999 (Public
4
Law 105–261; 50 U.S.C. 1701 note) is amended—
5
(1) by striking paragraph (2) and inserting the
6
following:
7
‘‘(2) REVISIONS TO THE LIST.—
8
‘‘(A) ADDITIONS.—The Secretary of De-
9
fense, the Secretary of Commerce, or the Direc-
10
tor of National Intelligence may add a person
11
to the list required by paragraph (1) at any
12
time.
13
‘‘(B) REMOVALS.—A person may be re-
14
moved from the list required by paragraph (1)
15
if the Secretary of Defense, the Secretary of
16
Commerce, and the Director of National Intel-
17
ligence agree to remove the person from the
18
list.
19
‘‘(C) SUBMISSION OF UPDATES TO CON-
20
GRESS.—Not later than February 1 of each
21
year, the Secretary of Defense shall submit a
22
version of the list required in paragraph (1),
23
updated to include any additions or removals
24
under this paragraph, to the committees and of-
25
ficers specified in paragraph (1).’’;
26
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(2) by striking paragraph (3) and inserting the
1
following:
2
‘‘(3) CONSULTATION.—In carrying out para-
3
graphs (1) and (2), the Secretary of Defense, the
4
Secretary of Commerce, and the Director of Na-
5
tional Intelligence shall consult with each other, the
6
Attorney General, and the Director of the Federal
7
Bureau of Investigation.’’; and
8
(3) in paragraph (4), in the matter preceding
9
subparagraph (A), by striking ‘‘making the deter-
10
mination required by paragraph (1) and of carrying
11
out paragraph (2)’’ and inserting ‘‘this section’’.
12
SEC. 4. ANALYSIS OF FINANCIAL AMBITIONS OF THE GOV-
13
ERNMENT OF THE PEOPLE’S REPUBLIC OF
14
CHINA.
15
(a) ANALYSIS REQUIRED.—The Director of the Of-
16
fice of Commercial and Economic Analysis of the Air
17
Force shall conduct an analysis of—
18
(1) the strategic importance to the Government
19
of the People’s Republic of China of inflows of
20
United States dollars through capital markets to the
21
People’s Republic of China;
22
(2) the methods by which that Government
23
seeks to manage such inflows;
24
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•S 152 IS
(3) how the inclusion of the securities of Chi-
1
nese entities in stock or bond indexes affects such
2
inflows and serves the financial ambitions of that
3
Government; and
4
(4) how the listing of the securities of Chinese
5
entities on exchanges in the United States assists
6
in—
7
(A) meeting the strategic goals of that
8
Government, including defense, surveillance,
9
and intelligence goals; and
10
(B) the fusion of the civilian and military
11
components of that Government.
12
(b) SUBMISSION TO CONGRESS.—The Director of the
13
Office of Commercial and Economic Analysis of the Air
14
Force shall subm
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