[Federal Register Volume 85, Number 111 (Tuesday, June 9, 2020)]
[Presidential Documents]
[Pages 35171-35173]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-12585]


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  Federal Register / Vol. 85, No. 111 / Tuesday, June 9, 2020 / 
Presidential Documents  

[[Page 35171]]


                Memorandum of June 4, 2020

                
Protecting United States Investors From 
                Significant Risks From Chinese Companies

                Memorandum for the Secretary of the Treasury[,] the 
                Assistant to the President for Economic Policy[, and] 
                the Assistant to the President for National Security 
                Affairs

                By the authority vested in me as President by the 
                Constitution and the laws of the United States of 
                America, and to ensure the integrity of United States 
                financial markets, it is hereby ordered as follows:

                Section 1. Purpose. United States capital markets have 
                long been the driving engine of the global economy. The 
                combination of robust disclosure requirements, clear 
                and effective regulation, fair enforcement, and a free 
                market system have made the United States the premier 
                jurisdiction in the world for raising capital. 
                Investors trust the financial information provided by 
                United States public companies and know that fraudulent 
                activities will promptly be addressed by United States 
                financial regulators. As a result, companies from 
                around the world want to list on United States stock 
                exchanges and raise money in the United States.

                Chinese companies are no exception. For decades, 
                Chinese companies have availed themselves of the 
                benefits of United States financial markets, and 
                capital raised in the United States has helped fuel 
                China's rapid economic growth. While China reaps 
                advantages from American markets, however, the Chinese 
                government has consistently prevented Chinese companies 
                and companies with significant operations in China from 
                abiding by the investor protections that apply to all 
                companies listing on United States stock exchanges. It 
                is both wrong and dangerous for China to benefit from 
                our capital markets without complying with critical 
                protections that investors in those markets rightfully 
                expect and deserve. China's actions to thwart our 
                transparency laws raise significant risks for 
                investors. The time has come to take firm action in an 
                orderly fashion to put an end to the practice that has 
                tacitly permitted companies with significant Chinese 
                operations to flout protections United States law 
                requires for investors in United States markets.

                For example, the Chinese government refuses to allow 
                audit firms registered with the Public Company 
                Accounting Oversight Board (PCAOB) to provide audit 
                working papers to the PCAOB so that it can fulfill its 
                statutory obligation to inspect audit work and enforce 
                audit standards. Recently, the Chinese government 
                enacted a statute that expressly prevents audit firms 
                from providing this information without the prior 
                consent of Chinese financial regulators. Preventing the 
                PCAOB from complying with its statutory mandate means 
                that investors cannot have confidence in the financial 
                reports of audited companies and creates significant 
                risks to investors in the securities listed on United 
                States stock exchanges.

                The Securities and Exchange Commission (SEC) and PCAOB 
                have pressed China for years to allow companies to 
                provide greater transparency in financial information, 
                to no avail. Concerns about China's efforts to thwart 
                transparency requirements suggest significant risks 
                even for investors in Chinese companies listed on 
                United States stock exchanges. Such companies may not 
                provide appropriate and safe investments for investors, 
                including pension funds, which owe fiduciary duties to 
                their beneficiaries.

[[Page 35172]]

                For these reasons, we must take firm, orderly action to 
                end the Chinese practice of flouting American 
                transparency requirements without negatively affecting 
                American investors and financial markets. We must 
                ensure that laws providing protections for investors in 
                American financial markets are fully enforced for 
                companies listed on United States stock exchanges.

                Sec. 2. President's Working Group on Financial Markets. 
                Executive Order 12631 of March 18, 1988 (Working Group 
                on Financial Markets), established the President's 
                Working Group on Financial Markets (PWG), which is 
                chaired by the Secretary of the Treasury, or his 
                designee, and includes the Chairman of the Board of 
                Governors of the Federal Reserve System, the Chairman 
                of the SEC, and the Chairman of the Commodity Futures 
                Trading Commission, or their designees. The Secretary 
                of the Treasury shall convene the PWG to discuss the 
                risks to investors described in section 1 of this 
                memorandum and other risks to American investors and 
                financial markets posed by the Chinese government's 
                failure to uphold its international commitments to 
                transparency and accountability and its refusal to 
                permit companies to comply with United States law.

                Sec. 3. Report. Within 60 days of the date of this 
                memorandum, the PWG shall submit to the President, 
                through the Assistant to the President for National 
                Security Affairs and the Assistant to the President for 
                Economic Policy, a report that includes:

                    (a) Recommendations for actions the executive 
                branch may take to protect investors in United States 
                financial markets from the failure of the Chinese 
                government to allow PCAOB-registered audit firms to 
                comply with United States securities laws and investor 
                protections;
                    (b) Recommendations for actions the SEC or PCAOB 
                should take, including inspection or enforcement 
                actions, with respect to PCAOB-registered audit firms 
                that fail to provide requested audit working papers or 
                otherwise fail to comply with United States securities 
                laws; and
                    (c) Recommendations for additional actions the SEC 
                or any other Federal agency or department should take 
                as a means to protect investors in Chinese companies, 
                or companies from other countries that do not comply 
                with United States securities laws and investor 
                protections, including initiating a notice of proposed 
                rulemaking that would set new listing rules or 
                governance safeguards. Any such actions should take 
                into account the impact on investors and ensure the 
                continued fair and orderly operation of United States 
                financial markets.

                Sec. 4. General Provisions. (a) Nothing in this 
                memorandum shall be construed to impair or otherwise 
                affect:

(i) the authority granted by law to an executive department or agency, or 
the head thereof; or

(ii) the functions of the Director of the Office of Management and Budget 
relating to budgetary, administrative, or legislative proposals.

                    (b) This memorandum shall be implemented consistent 
                with applicable law and subject to the availability of 
                appropriations.

[[Page 35173]]

                    (c) This memorandum is not intended to, and does 
                not, create any right or benefit, substantive or 
                procedural, enforceable at law or in equity by any 
                party against the United States, its departments, 
                agencies, or entities, its officers, employees, or 
                agents, or any other person.
                    (d) The Secretary of the Treasury is authorized and 
                directed to publish this memorandum in the Federal 
                Register.
                
                
                    (Presidential Sig.)

                THE WHITE HOUSE,

                    Washington, June 4, 2020

[FR Doc. 2020-12585
Filed 6-8-20; 8:45 am]
Billing code 4811-33-P