Senators Scott and Warren Lead 18 Bipartisan Senators Demanding Action on Chinese VIE Structures, National Security Risks, and Investor Protection
WASHINGTON, D.C. — The Coalition for a Prosperous America (CPA) today applauded Senate Banking Committee Chairman Tim Scott (R-SC) and Ranking Member Elizabeth Warren (D-MA) for leading a bipartisan letter to Securities and Exchange Commission (SEC) Chairman Paul Atkins urging the agency to restrict Chinese companies’ access to U.S. capital markets.
As first reported by the Financial Times, the letter, co-signed by all 13 Republicans on the committee and five Democrats, warns of the “unique risks to national security, market integrity and investor protection posed by SEC-registered entities with ties to the People’s Republic of China.”
CPA has led the fight to expose and end China’s exploitation of U.S. capital markets. In a series of three landmark reports, CPA has documented in detail how Wall Street firms funnel billions of dollars in American investor capital to CCP-controlled and PLA-linked companies — often without the knowledge of the retail investors whose retirement savings are at risk. CPA’s reports — including “Case Study for Congress: Vanguard & FTSE Russell” (2023), “BlackRock & MSCI: How Wall Street’s Offshore Companies Fund the CCP & PLA” (2024), and “Inside the Wire: Wall Street’s Joint Ventures with the Chinese Communist Party” (2024) — have exposed the full scope of this national security and investor protection crisis.
“This bipartisan letter from the Senate Banking Committee is a powerful signal that Congress is finally taking seriously what CPA has been warning about for years: the Chinese Communist Party has been exploiting America’s capital markets to fund its military modernization, underwrite its surveillance state, and enrich entities engaged in genocide, forced labor, and espionage — all with American investor capital,” said Jon Toomey, President of CPA. “The VIE structure is a nefarious legal fiction designed by the CCP to circumvent China’s own laws on foreign ownership while giving Chinese companies backdoor access to U.S. exchanges. American investors who buy shares of these shell companies incorporated in the Cayman Islands own nothing of the underlying Chinese business — and they have zero legal recourse. It’s time for the SEC to put an end to this scheme.”
The senators’ letter specifically calls on the SEC to examine how Variable Interest Entity (VIE) structures are “being used, as they may advance Chinese government objectives in ways that undermine investor protection and fair, orderly and efficient markets.” CPA has long identified VIEs as one of the most dangerous mechanisms through which Chinese companies access U.S. capital without complying with U.S. securities laws — lacking adequate material risk disclosure, transparent financials, corporate governance protections, or shareholder rights.
Roger W. Robinson, Jr., former Senior Director of International Economic Affairs at the Reagan National Security Council, former Chairman of the U.S.-China Economic and Security Review Commission, and trusted advisor to CPA, issued the following statement:
“This is a landmark moment. For over two decades, a number of our country’s largest asset managers on Wall Street have funneled trillions of dollars into the coffers of the Chinese Communist Party and the People’s Liberation Army. Tragically, this has included Chinese enterprises equipping concentration camps, trafficking in forced labor, building aircraft carriers, advanced combat aircraft, and developing hypersonic weapons to name a few — while American retail investors have been kept in the dark with regard to where their money was going and how it was being used.
“The roughly 5,000 Chinese companies traded on U.S. exchanges almost universally lack compliance with federal securities laws, adequate material risk disclosure, corporate transparency and governance, as well as shareholder rights and legal protections. There has also been a near-complete dearth of security-minded and human rights-minded due diligence in the course of investment decision making.
“The fact that 18 senators from both parties are now demanding action from the SEC underscores what CPA’s reports have made abundantly clear: Congress must make these reckless investments in Chinese companies that are sanctioned or blacklisted by the United States illegal worldwide to protect our national security, our fundamental values, and the retirement savings of scores of millions of American retail investors.”
CPA’s research has documented how more than 5,000 Chinese A-share companies are currently embedded in American passive investment products with no U.S. regulatory oversight, and how index providers like MSCI and FTSE Russell have driven an estimated $80 billion in foreign capital into Chinese markets — including into sanctioned military-linked companies. CPA’s “Inside the Wire” report further revealed how major U.S. financial institutions including BlackRock, Goldman Sachs, and J.P. Morgan Chase have formed joint ventures with CCP-controlled banks, operating under Chinese law and giving Beijing unprecedented leverage over Wall Street’s management class.
CPA urges the SEC to take immediate and decisive action, including examining the use of VIE structures by Chinese companies listed on U.S. exchanges, strengthening disclosure requirements for offshore issuers with ties to Chinese businesses, and ensuring that American investors are fully informed of the risks associated with these securities.
CPA also calls on Congress to advance legislation — including Senator Rick Scott’s legislative package — that would prohibit U.S. index funds from investing in Chinese companies, mandate risk warning labels for VIE-linked securities, and expand sanctions to hold the CCP accountable for its exploitation of U.S. financial markets.
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