II 

118TH CONGRESS 

2D SESSION S. 4589 

To prohibit index funds and registered investment companies from investing 

in Chinese companies, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

JUNE 18, 2024 

Mr. SCOTT of Florida introduced the following bill; which was read twice and 

referred to the Committee on Banking, Housing, and Urban Affairs 

A BILL 

To prohibit index funds and registered investment companies 

from investing in Chinese companies, and for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Safeguarding U.S. Fi5 nancial Leadership Against Communist China Act’’. 

6 SEC. 2. FINDINGS. 

7 Congress finds the following: 

8 (1) A 2024 report by the Select Committee on 

9 the Chinese Communist Party of the House of Rep10 resentatives found that index providers and asset 


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1 managers, on an industry-wide basis, have facilitated 

2 the investment of more than $6,500,000,000 in com3 panies that are based in the People’s Republic of 

4 China and that the Federal Government has red5 flagged or blacklisted for advancing the military ca6 pabilities, or supporting the human rights abuses, of 

7 the People’s Republic of China. 

8 (2) A 2023 report by the Coalition for a Pros9 perous America documented the astounding level by 

10 which financial institutions and investment firms 

11 that are based in the United States fund companies 

12 in the People’s Republic of China, including such 

13 companies that have been sanctioned by the Federal 

14 Government and prohibited from doing business in 

15 the United States. 

16 (3) A 2021 report by the U.S.–China Economic 

17 and Security Review Commission stated that the 

18 Government of the People’s Republic of China per19 mits the participation of foreign firms and investors 

20 in the Chinese market only when that participation 

21 suits the national interest of the People’s Republic 

22 of China, and, as a result, a nominal financial open23 ing in the People’s Republic of China is, in reality, 

24 a carefully managed process designed to reinforce 

25 state control over capital markets and channel forVerDate Sep 11 2014 02:25 Aug 07, 2024 Jkt 049200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S4589.IS S4589

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1 eign funding toward fulfilling the national develop2 ment objectives of that Government. 

3 (4) Every dollar invested and spent in the Peo4 ple’s Republic of China funds the atrocities of the 

5 Government of the People’s Republic of China, such 

6 as the genocide of the Uyghurs, and the campaign 

7 of that Government to destroy the United States. 

8 (5) To protect the freedom to invest, and the 

9 integrity of the capital markets of the United States, 

10 Congress must ensure that those capital markets are 

11 not being polluted and distorted by nefarious, non12 market economy actors, such as the Government of 

13 the People’s Republic of China. 

14 (6) Congress must address— 

15 (A) the threats that the Government of the 

16 People’s Republic of China poses to investors in 

17 the United States; and 

18 (B) the consequences of massive invest19 ment by the United States in the military-civil 

20 fusion apparatus of a regime that wishes to de21 stroy the way of life in the United States. 

22 SEC. 3. PROHIBITION. 

23 (a) DEFINITIONS.—In this section: 

24 (1) CHINESE COMPANY.—The term ‘‘Chinese 

25 company’’ means a company— 


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1 (A) that is incorporated in, or otherwise 

2 organized under the laws of, the People’s Re3 public of China; 

4 (B) the majority of the assets or employees 

5 of which are located in the People’s Republic of 

6 China; 

7 (C) that is majority-owned by, controlled 

8 by, or subject to the jurisdiction or direction of 

9 the Government of the People’s Republic of 

10 China; 

11 (D) the majority of the value of which de12 pends on the revenues, profits, market capital13 ization, assets, or value of a security (including 

14 options to purchase or sell) of a company de15 scribed in subparagraph (A), (B), or (C); or 

16 (E) with respect to which a company de17 scribed in subparagraph (A), (B), or (C) has 

18 control (as defined in section 230.405 of title 

19 17, Code of Federal Regulations, or any suc20 cessor regulation). 

21 (2) COMMISSION.—The term ‘‘Commission’’ 

22 means the Securities and Exchange Commission. 

23 (3) HEDGE FUND.—The term ‘‘hedge fund’’ 

24 means an issuer that would be an investment com25 pany but for paragraph (1) or (7) of section 3(c) of 


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1 the Investment Company Act of 1940 (15 U.S.C. 

2 80a–3(c)). 

3 (4) INDEX FUND.—The term ‘‘index fund’’ 

4 means an investment company or hedge fund that is 

5 designed to track an index of securities or a portion 

6 of such an index. 

7 (5) INVESTMENT COMPANY.—The term ‘‘invest8 ment company’’ has the meaning given the term in 

9 section 3 of the Investment Company Act of 1940 

10 (15 U.S.C. 80a–3). 

11 (6) REGISTERED INVESTMENT COMPANY.—The 

12 term ‘‘registered investment company’’ means an in13 vestment company that is registered with the Com14 mission pursuant to the Investment Company Act of 

15 1940 (15 U.S.C. 80a–1 et seq.). 

16 (b) PROHIBITION ON INVESTMENT.— 

17 (1) GENERAL PROHIBITION.— 

18 (A) IN GENERAL.—Neither an index fund 

19 nor a registered investment company may in20 vest in a Chinese company. 

21 (B) DIVESTMENT PERIOD SAFE HAR22 BOR.—With respect to an index fund or reg23 istered investment company with an investment 

24 in a Chinese company on the date of enactment 

25 of this Act, subparagraph (A) shall not apply to 


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1 that investment during the 1-year period begin2 ning on that date of enactment. 

3 (2) DIVESTMENT PLAN.—Not later than 180 

4 days after the date of enactment of this Act, each 

5 index fund and registered investment company with 

6 an investment in a Chinese company shall develop, 

7 and share with the shareholders of and investors in 

8 the applicable entity, a written plan on how the enti9 ty will divest from each such investment to come 

10 into compliance with this subsection. 

11 (c) CIVIL PENALTY.— 

12 (1) IN GENERAL.—Any person that violates this 

13 section shall be subject to a civil penalty of the fol14 lowing amount: 

15 (A) With respect to a violation of sub16 section (b)(1), an amount not to exceed the 

17 greater of— 

18 (i) $500,000; or 

19 (ii) an amount that is twice the 

20 amount of the transaction that is the basis 

21 of the violation with respect to which the 

22 penalty is imposed. 

23 (B) With respect to a violation of sub24 section (b)(2), $500,000 for each day the per25 son is in violation of subsection (b)(2). 


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1 (2) AMOUNT OF A TRANSACTION DEFINED.— 

2 For purposes of paragraph (1)(A)(ii), the term 

3 ‘‘amount of a transaction’’ means— 

4 (A) with respect to a purchase that is the 

5 basis of the applicable violation, the purchase 

6 price; and 

7 (B) with respect to the holding of an in8 vestment that is the basis of the applicable vio9 lation, the fair market value of the investment 

10 at the time of the violation. 

Æ 


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