[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]
Presidential Documents
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