[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[H.R. 9162 Introduced in House (IH)]

<DOC>






118th CONGRESS
  2d Session
                                H. R. 9162

To amend the securities laws to require certain disclosures and reports 
  with respect to the exposure of issuers to China and the threat of 
 sudden loss of market access between the United States and China, and 
                          for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             July 25, 2024

    Mr. Luetkemeyer (for himself, Mr. Moolenaar, and Mr. Newhouse) 
 introduced the following bill; which was referred to the Committee on 
                           Financial Services

_______________________________________________________________________

                                 A BILL


 
To amend the securities laws to require certain disclosures and reports 
  with respect to the exposure of issuers to China and the threat of 
 sudden loss of market access between the United States and China, and 
                          for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``PRC Risk Transparency Act''.

SEC. 2. CHINA EXPOSURE DISCLOSURES.

    (a) Covered Issuer Disclosures.--Section 13 of the Securities 
Exchange Act of 1934 (15 U.S.C. 78m) is amended by adding at the end 
the following:
    ``(t) China Exposure Disclosures.--
            ``(1) In general.--Each covered issuer required to file an 
        annual report under subsection (a) shall disclose in that 
        report the following information, to the extent the information 
        would be material to investors, with respect to the period 1 
        year prior to the disclosure under this subsection:
                    ``(A) China exposure.--
                            ``(i) The percentage of the total revenue 
                        and profits of the issuer that are derived from 
                        each of--
                                    ``(I) the People's Republic of 
                                China (`China');
                                    ``(II) Hong Kong; and
                                    ``(III) the Xinjiang Uyghur 
                                Autonomous Region.
                            ``(ii) The percentage and the total value 
                        of the capital investment of the issuer that is 
                        located in each of--
                                    ``(I) China;
                                    ``(II) Hong Kong; and
                                    ``(III) the Xinjiang Uyghur 
                                Autonomous Region.
                            ``(iii) The percentage and the total value 
                        of the supply chain of the issuer that is 
                        sourced from each of--
                                    ``(I) China;
                                    ``(II) Hong Kong; and
                                    ``(III) the Xinjiang Uyghur 
                                Autonomous Region.
                            ``(iv) Details on any joint venture with a 
                        covered entity, including--
                                    ``(I) the covered entity in the 
                                joint venture;
                                    ``(II) the percentage of total 
                                revenue and of total profits of the 
                                issuer that are derived from the joint 
                                venture; and
                                    ``(III) the percentage and the 
                                total value of the capital investment 
                                associated with the joint venture.
                    ``(B) Threat of sudden loss of market access.--
                            ``(i) The anticipated impact of the 
                        scenario described in paragraph (2) on the 
                        business operations, supply chain, revenues and 
                        profits, and future earnings of the issuer, to 
                        the extent it would be material to investors.
                            ``(ii) Whether the issuer has a plan in 
                        place to deal with the scenario described in 
                        paragraph (2).
                            ``(iii) The outlines of the plan described 
                        in clause (ii) and any actions the issuer is 
                        taking to prepare for the scenario described in 
                        paragraph (2).
                    ``(C) Relationships with certain entities.--A list 
                of business relationships with any of the following 
                entities, their affiliates, and their subsidiaries:
                            ``(i) Any entity on the Non-SDN Chinese 
                        Military-Industrial Complex Companies List (NS-
                        CMIC List) maintained by the Office of Foreign 
                        Assets Control of the Department of the 
                        Treasury under Executive Order 14032 (86 Fed. 
                        Reg. 30145; relating to addressing the threat 
                        from securities investments that finance 
                        certain companies of the People's Republic of 
                        China), or any successor order.
                            ``(ii) Any Chinese military company 
                        identified by the Secretary of Defense pursuant 
                        to section 1260H of the William M. (Mac) 
                        Thornberry National Defense Authorization Act 
                        for Fiscal Year 2021 (Public Law 116-283; 10 
                        U.S.C. 113 note).
                            ``(iii) Any entity included on any of the 
                        following lists maintained by the Department of 
                        Commerce in the following locations of the 
                        Export Administration Regulations set forth in 
                        subchapter C of chapter VII of title 15, Code 
                        of Federal Regulations:
                                    ``(I) The Entity List set forth in 
                                Supplement No. 4 to part 744 of the 
                                Export Administration Regulations or 
                                any successor regulations.
                                    ``(II) The Denied Persons List as 
                                described in section 764.3(a)(2) of the 
                                Export Administration Regulations or 
                                any successor regulations.
                                    ``(III) The Military End User List 
                                set forth in Supplement No. 7 to part 
                                744 of the Export Administration 
                                Regulations or any successor 
                                regulations.
                            ``(iv) Any entity on which sanctions have 
                        been imposed by the Office of Foreign Assets 
                        Control of the Department of the Treasury in 
                        connection with human rights abuses.
                            ``(v) Any entity that produces equipment 
                        that is prohibited under the Report and Order, 
                        Order, and Further Notice of Proposed 
                        Rulemaking of the Federal Communications 
                        Commission in the matter of Protecting Against 
                        National Security Threats to the Communications 
                        Supply Chain through the Equipment 
                        Authorization Program (ET No. 21-232) and 
                        Protecting Against National Security Threats to 
                        the Communications Supply Chain through the 
                        Competitive Bidding Program (EA Docket No. 21-
                        233; FCC 22-84; adopted November 11, 2022).
                            ``(vi) An entity on the Uyghur Forced Labor 
                        Prevention Act Entity List of the Forced Labor 
                        Enforcement Task Force.
                    ``(D) Ties to the government of the people's 
                republic of china.--A list of the following:
                            ``(i) Employees with a management role in 
                        the issuer that are members of the Chinese 
                        Communist Party, including each employee's role 
                        within the issuer.
                            ``(ii) Any business relationships with an 
                        agency or instrumentality of the government of 
                        the People's Republic of China, including the 
                        provision of goods, services, or technology to 
                        the People's Liberation Army, the Ministry of 
                        State Security, or other security or 
                        intelligence services in the People's Republic 
                        of China.
                            ``(iii) Any investment received from the 
                        government of the People's Republic of China or 
                        an agency or instrumentality thereof.
                            ``(iv) Any requests from any Chinese 
                        Communist Party official or agency or 
                        instrumentality of the government of the 
                        People's Republic of China (including requests 
                        made under the People's Republic of China 
                        Intelligence Law of 2017 or the Counter-
                        Espionage Law) that conflict with the issuer's 
                        obligations under this Act, the Securities Act 
                        of 1933, or the Sarbanes-Oxley Act of 2002.
            ``(2) Scenario.--
                    ``(A) In general.--The scenario described in this 
                paragraph is a scenario where, owing to an act of 
                Chinese military aggression--
                            ``(i) the President imposes sanctions on 
                        China, Chinese entities, and those who transact 
                        with China or Chinese entities of a similar 
                        type and magnitude as the sanctions imposed on 
                        the Russian Federation, Russian entities, and 
                        those who transact with the Russian Federation 
                        or Russian entities in response to the Russian 
                        Federation's February 2022 invasion of Ukraine;
                            ``(ii) the Secretary of Commerce implements 
                        export controls with respect to China of a 
                        similar type as the Secretary implemented with 
                        respect to the Russian Federation following the 
                        Russian Federation's February 2022 invasion of 
                        Ukraine;
                            ``(iii) trade between the United States and 
                        China declines by 80 percent and completely 
                        ceases in goods with military end-use or dual-
                        use applications;
                            ``(iv) the Chinese government imposes 
                        similar sanctions, export controls, and trade 
                        restrictions on the United States and United 
                        States companies as the Russian Federation 
                        government did following the Russian 
                        Federation's February 2022 invasion of Ukraine; 
                        and
                            ``(v) the Chinese government seizes all 
                        China-based assets of American companies that 
                        could be re-purposed for military production.
                    ``(B) Revisions.--On January 1, 2028, and every 3 
                years thereafter, the Financial Stability Oversight 
                Council may revise the scenario described under 
                subparagraph (A) by publishing a new scenario that, 
                after consultations with other executive branch 
                officials, seems most likely to occur as a result of 
                Chinese military aggression.
            ``(3) Board of directors certification.--The board of 
        directors of a covered issuer required to make a disclosure 
        under paragraph (1) shall certify that the board has reviewed 
        and affirmed the disclosure.
            ``(4) Rulemaking.--
                    ``(A) In general.--Not later than the end of the 
                60-day period beginning on the date of enactment of 
                this subsection, the Commission shall issue rules to 
                carry out the amendments made by this section.
                    ``(B) Proprietary information and trade secrets.--
                In issuing the rules required under subparagraph (A), 
                the Commission shall, in consultation with the Attorney 
                General and the National Security Council, ensure that 
                issuers may make the disclosure of information required 
                under such rules without disclosing proprietary 
                information or trade secrets.
                    ``(C) Safe harbor.--In issuing the rules required 
                under subparagraph (A), the Commission shall establish 
                rules under which a covered issuer shall not be held 
                liable for statements that were compiled with 
                reasonable due diligence and to the best of the covered 
                issuer's knowledge.
            ``(5) Definitions.--In this subsection, the following 
        definitions apply:
                    ``(A) China.--The term `China' means the People's 
                Republic of China, including all Special Administrative 
                Regions.
                    ``(B) Control.--The term `control' has the meaning 
                given in section 800.208 of title 31, Code of Federal 
                Regulations (as in effect on the date of enactment of 
                this subsection).
                    ``(C) Covered entity.--The term `covered entity' 
                means an entity--
                            ``(i) that is incorporated in, has a 
                        principal place of business in, or is organized 
                        under the laws of the People's Republic of 
                        China;
                            ``(ii) the equity securities of which are 
                        primarily traded in the ordinary course of 
                        business on one or more exchanges in the 
                        People's Republic of China;
                            ``(iii) that is the Chinese Communist 
                        Party, or the state or the government of the 
                        People's Republic of China, as well as any 
                        political subdivision, agency, or 
                        instrumentality thereof; or
                            ``(iv) that is subject to the direction or 
                        control of any entity described in clause (i), 
                        (ii), or (iii).
                    ``(D) Covered issuer.--The term `covered issuer' 
                means--
                            ``(i) an issuer--
                                    ``(I) with respect to which--
                                            ``(aa) at least 5 percent 
                                        of the revenue of the issuer is 
                                        derived from the Chinese 
                                        market;
                                            ``(bb) at least 5 percent 
                                        of the capital investment of 
                                        the issuer, by value, is 
                                        located in China; or
                                            ``(cc) at least 5 percent 
                                        of the supply chain of the 
                                        issuer, by value, is sourced 
                                        from China; and
                                    ``(II) that has a market 
                                capitalization of $1,000,000,000 or 
                                more at any point in the previous 365 
                                days; and
                            ``(ii) an issuer with respect to which--
                                    ``(I) at least 25 percent of the 
                                revenue of the issuer is derived from 
                                the Chinese market;
                                    ``(II) at least 25 percent of the 
                                capital investment of the issuer, by 
                                value, is located in China; or
                                    ``(III) at least 25 percent of the 
                                supply chain of the issuer, by value, 
                                is sourced from China.''.
    (b) Investment Adviser Disclosures.--Section 204 of the Investment 
Advisers Act of 1940 (15 U.S.C. 80b-4) is amended by adding at the end 
the following:
    ``(g) Report on the Loss of Market Access to China to Private Funds 
Advised by a Covered Investment Adviser.--
            ``(1) In general.--The Commission shall, by rule, require 
        each covered investment adviser, for each private fund advised 
        by the covered investment advisor, to disclose to the private 
        fund and the Commission, every quarter, a plain English report 
        that outlines the anticipated effects, to the extent it would 
        be material to investors, of a scenario of the type described 
        in section 13(t)(2) of the Securities and Exchange Act of 1934 
        on the returns of such fund.
            ``(2) Safe harbor.--A covered investment adviser that makes 
        a disclosure under paragraph (1), if such disclosure is made to 
        the best of the knowledge of the covered investment adviser 
        after reasonable investigation and due diligence and consistent 
        with the fiduciary duty of the covered investment adviser, 
        shall not be held liable for such disclosure.
            ``(3) Board of directors certification.--The board of 
        directors of a covered investment adviser required to make a 
        disclosure under paragraph (1) shall certify that the board has 
        reviewed and affirmed the disclosure.
            ``(4) Covered investment adviser defined.--In this 
        subsection, the term `covered investment adviser' means an 
        investment adviser with assets under management of $500,000,000 
        or more at any point in the previous 365 days.
    ``(h) Report on Exposure to Covered Foreign Entities.--
            ``(1) In general.--The Commission shall, by rule, require 
        each covered investment adviser to disclose to the Commission, 
        every quarter--
                    ``(A) for each investment company advised by the 
                covered investment advisor--
                            ``(i) the total exposure of the investment 
                        company to covered foreign entities;
                            ``(ii) a list of each security issued by a 
                        covered foreign entity and held by the 
                        investment company; and
                            ``(iii) the value of each holding;
                    ``(B) the total exposure of all investment 
                companies advised by the covered investment adviser to 
                covered foreign entities;
                    ``(C) a list of each security issued by a covered 
                foreign entity and held by an investment company 
                advised by the covered investment adviser; and
                    ``(D) the value of each holding identified under 
                subparagraph (C).
            ``(2) Definitions.--In this subsection:
                    ``(A) Covered foreign entity.--The term `covered 
                foreign entity' means a covered entity, as defined 
                under section 13(t)(5) of the Securities and Exchange 
                Act of 1934.
                    ``(B) Covered investment adviser.--The term 
                `covered investment adviser' has the meaning given the 
                term under subsection (g)(4).''.
    (c) Investment Company Disclosures.--Section 30 of the Investment 
Company Act of 1940 (15 U.S.C. 80a-29) is amended by adding at the end 
the following:
    ``(l) Report on Exposure to Covered Foreign Entities and Variable 
Interest Entities.--
            ``(1) In general.--The Commission shall, by rule, require 
        each registered investment company to disclose to the 
        Commission, every quarter--
                    ``(A) the total exposure of the investment company 
                to covered foreign entities, including;
                            ``(i) a list of each security issued by a 
                        covered foreign entity and held by the 
                        investment company; and
                            ``(ii) the value of each holding; and
                    ``(B) the total exposure of the investment company 
                to variable interest entities, including--
                            ``(i) a list of each security issued by a 
                        variable interest entity held by the investment 
                        company; and
                            ``(ii) the value of each holding.
            ``(2) Covered foreign entity defined.--In this subsection, 
        the term `covered foreign entity' means a covered entity, as 
        defined under section 13(t)(5) of the Securities and Exchange 
        Act of 1934.''.
    (d) Variable Interest Entity Exposure.--Section 204(b)(3)(C) of the 
Investment Advisers Act of 1940 (15 U.S.C. 80b-4(b)(3)(C)) is amended 
by inserting before the semicolon the following: ``, including total 
exposure to variable interest entities, a list of each security issued 
by a variable interest entity held in the fund, and the value of those 
securities''.
    (e) No Expansion of Liability.--No provision under the amendments 
made by this section requiring the disclosure of information shall give 
rise to a claim under the Securities Act of 1933 or the Securities 
Exchange Act of 1934 unless the disclosure is both--
            (1) false or misleading; and
            (2) material to an investment decision such that there is a 
        substantial likelihood that a reasonable investor would 
        consider the information important in assessing the risk-
        adjusted financial returns from the investment decision.
                                 <all>