SAFE from PRC Investments Act

Subjects: Finance and Financial Sector

Summary:  <p><b>Securing American Families and Enterprises from People's Republic of China Investments Act or the SAFE from PRC Investments Act </b></p> <p>This bill requires certain issuers of securities and funds traded on an exchange to report on connections to China or the Communist Party of China. In particular, an issuer with specified connections to China must annually disclose a variety of details, including </p> <ul> <li>whether executive-level employees, senior directors, or board members are members of the Communist Party of China; </li> <li>interactions with the party; </li> <li>expenditures in China; </li> <li>expenditures in the United States regarding operations and lobbying activities; and </li> <li>the ability of the Public Company Accounting Oversight Board to audit the issuer. </li> </ul> <p>Additionally, an exchange-traded fund that invests in a Chinese company must annually disclose about that company </p> <ul> <li>ownership information, </li> <li>party involvement, </li> <li>whether the company participates in specified Chinese policies or activities, </li> <li>any ties to U.S.-sanctioned individuals, and </li> <li>the types of products or services produced by the company.</li> </ul>

<html><body><pre>[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[H.R. 499 Introduced in House (IH)]

&lt;DOC&gt;






118th CONGRESS
  1st Session
                                H. R. 499

    To amend the Securities Exchange Act of 1934 to require certain 
 additional annual disclosures by public companies and exchange-traded 
  funds investing in companies with ties to the People's Republic of 
                     China, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            January 25, 2023

  Mr. Fallon (for himself, Mr. Ellzey, Mr. Jackson of Texas, and Mr. 
   Amodei) introduced the following bill; which was referred to the 
                    Committee on Financial Services

_______________________________________________________________________

                                 A BILL


 
    To amend the Securities Exchange Act of 1934 to require certain 
 additional annual disclosures by public companies and exchange-traded 
  funds investing in companies with ties to the People's Republic of 
                     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 ``Securing American Families and 
Enterprises from People's Republic of China Investments Act'' or the 
``SAFE from PRC Investments Act''.

SEC. 2. ADDITIONAL DISCLOSURES TO PROTECT AMERICAN INVESTORS AND 
              BUSINESSES.

    Section 13 of the Securities Exchange Act of 1934 (15 U.S.C. 78m) 
is amended by adding at the end the following:
    ``(s) Additional Disclosures To Protect American Investors and 
Businesses.--
            ``(1) In general.--Each covered issuer that is required to 
        file an annual report under section 13(a) or 15(d) shall 
        disclose in that report the following:
                    ``(A) Whether a senior official of the national- or 
                provincial-level governments of the People's Republic 
                of China (`PRC') sits on the board of directors of the 
                issuer or any subsidiary of the issuer.
                    ``(B) Whether executive-level employees, senior 
                directors, and board members of the issuer are members 
                of the Communist Party of China.
                    ``(C) Whether executive-level employees, senior 
                directors, and board members of the issuer have 
                immediate family members that are senior officials of 
                the Communist Party of China or the Government of the 
                People's Republic of China.
                    ``(D) Whether the issuer has a party branch or 
                committee as part of the issuer's corporate structure.
                    ``(E) With respect to the operations of the issuer 
                located in the PRC--
                            ``(i) the amount of cash held;
                            ``(ii) any limits imposed by the Communist 
                        Party of China or the Government of the 
                        People's Republic of China on the ability to 
                        take such cash out of the country; and
                            ``(iii) disclosure of investments, assets 
                        and liabilities, technology licensed or 
                        transferred, and financing or debt obligations 
                        involving PRC operations or from a PRC entity.
                    ``(F) The number of times executive-level employees 
                of the issuer interact with senior officials of the 
                Communist Party of China and the costs of those 
                meetings and any transfer of goods, money, or services 
                between issuer's employees.
                    ``(G) The amount the issuer has expended on 
                operations in the People's Republic of China, both in 
                total and for the prior fiscal year.
                    ``(H) The amount the issuer has expended on 
                operations in the United States, both in total and for 
                the prior fiscal year.
                    ``(I) The amount (both in total and for the prior 
                fiscal year) that the issuer has spent on lobbying in 
                the United States, including--
                            ``(i) whether the issuer or any subsidiary 
                        of the issuer has reported any sums under the 
                        Foreign Agents Registration Act of 1938; and
                            ``(ii) whether the issuer or any subsidiary 
                        of the issuer has reported any sums under the 
                        Lobbying Disclosure Act of 1995.
                    ``(J) Whether the Public Company Accounting 
                Oversight Board is unable to inspect or investigate a 
                registered public accounting firm retained by the 
                issuer to prepare an audit report on the financial 
                statement of the issuer.
                    ``(K) The amount of taxes and other fees the issuer 
                paid to the Government of the People's Republic of 
                China on an annual basis.
                    ``(L) With respect to customer data--
                            ``(i) who has access to such data;
                            ``(ii) disclosure of instances when 
                        information is requested, arrangements that may 
                        allow passive or continuous access, efforts to 
                        protect such data, instances of cyber-attack, 
                        corporate or personnel disputes that involve 
                        potential breaches, and notification of other 
                        breaches; and
                            ``(iii) whether such data is stored in the 
                        United States and, if not, the country or 
                        territory in which such data is stored.
                    ``(M) For each subsidiary of the issuer located in 
                the PRC, the information described under subparagraphs 
                (A) through (L) with respect to such subsidiary.
                    ``(N) If the issuer or any subsidiary of the issuer 
                located in the PRC produces goods or services that are 
                part of a military-civil fusion strategy, whether the 
                issuer has consulted with the People's Liberation Army 
                or the Ministry of State Security with regard to 
                industrial policy.
            ``(2) Definitions.--In this subsection:
                    ``(A) Communist party of china.--The term 
                `Communist Party of China' means the ruling party of 
                the People's Republic of China, including--
                            ``(i) party bodies at the national and sub-
                        national level; and
                            ``(ii) any agency or instrumentality of the 
                        Communist Party of China.
                    ``(B) Covered issuer.--The term `covered issuer' 
                means an issuer--
                            ``(i) that is--
                                    ``(I) headquartered in the PRC 
                                (including the Hong Kong and Macau 
                                Special Administrative Regions);
                                    ``(II) a branch or subsidiary of an 
                                issuer headquartered in the PRC; or
                                    ``(III) a variable interest entity 
                                or other type of firm structured 
                                through a series of contracts or 
                                overlapping personnel--
                                            ``(aa) that are tied to 
                                        core operations in the PRC; or
                                            ``(bb) controlled and owned 
                                        by an issuer headquartered in 
                                        the PRC; or
                            ``(ii) that--
                                    ``(I) is domiciled in a tax haven 
                                jurisdiction or self-governing 
                                territories, including the Cayman 
                                Islands, British Virgin Islands, 
                                Bermuda, the Netherlands, Switzerland, 
                                Luxembourg, Singapore, the United Arab 
                                Emirates, the Bahamas, Cyprus, or 
                                Mauritius; and
                                    ``(II) has the majority of the 
                                issuer's business operations taking 
                                place or the majority of the issuer's 
                                revenue generated in mainland China.
                    ``(C) Government of the people's republic of 
                china.--The term `Government of the People's Republic 
                of China' means any of the following:
                            ``(i) Any national or sub-national 
                        governmental unit of the People's Republic of 
                        China.
                            ``(ii) Any national or sub-national 
                        legislature of the People's Republic of China.
                            ``(iii) Any national or sub-national 
                        People's Political Consultative Conference of 
                        the People's Republic of China.
                            ``(iv) Any national or sub-national 
                        judicial or prosecutorial body of the People's 
                        Republic of China.
                            ``(v) Any national or sub-national 
                        supervision commission of the People's Republic 
                        of China.
                            ``(vi) Any agency or instrumentality of the 
                        People's Republic of China.
                    ``(D) Immediate family member.--The term `immediate 
                family member' shall include a spouse, domestic 
                partner, mother, father, aunt, uncle, sibling, or 
                child.
                    ``(E) Military-civil fusion strategy.--The term 
                `military-civil fusion strategy' means the strategy of 
                the Communist Party of China aiming to mobilize non-
                military resources and expertise for military 
                application, including--
                            ``(i) the development of technology, 
                        improvements in logistics, and other uses by 
                        the People's Liberation Army; and
                            ``(ii) firms which develop and acquire 
                        advanced dual-use technology for military 
                        purposes.
                    ``(F) PRC.--The term `PRC' means the People's 
                Republic of China.
                    ``(G) Senior official.--The term `senior official', 
                when used in connection with the Government of the 
                People's Republic of China or the Communist Party of 
                China, means--
                            ``(i) an official with the rank of a deputy 
                        at the provincial or ministerial level (shengbu 
                        ji fu zhi) or higher; or
                            ``(ii) a chief at the bureau level (tingju 
                        ji zheng zhi) or higher.
                    ``(H) Variable interest entity.--The term `variable 
                interest entity' means an entity where an investor has 
                a controlling interest that is not based on holding the 
                majority of voting rights.''.

SEC. 3. DISCLOSURES BY EXCHANGE TRADED FUNDS INVESTING IN CHINESE 
              COMPANIES.

    Section 13 of the Securities Exchange Act of 1934 (15 U.S.C. 78m), 
as amended by section 2, is further amended by adding at the end the 
following:
    ``(t) Disclosures by Exchange Traded Funds Investing in Chinese 
Companies.--
            ``(1) In general.--Each exchange traded fund required to 
        file an annual report under section 13(a) or 15(d) shall, if 
        the fund invested in the securities of any PRC company during 
        the reporting period, include in such report the following, 
        with respect to each such PRC company:
                    ``(A) Who owns the company, including whether the 
                company is owned by the Government of the People's 
                Republic of China or a PRC state-controlled entity.
                    ``(B) Whether the company operates a Communist 
                Party of China branch or committee within the company's 
                corporate structure.
                    ``(C) Whether the company has any contractual 
                agreements with the Government of the People's Republic 
                of China or the Communist Party of China or any agency 
                or instrumentality of either.
                    ``(D) Whether the company has participated in the 
                PRC's industrial policies or has military or public 
                security contracts.
                    ``(E) Whether any funding, direction, or other 
                forms of control over the company are exercised by the 
                Government of the People's Republic of China or the 
                Communist Party of China.
                    ``(F) Whether executive-level employees and board 
                members of the company have immediate family members 
                who are senior officials of the Communist Party of 
                China or the Government of the People's Republic of 
                China or are themselves senior officials of the 
                Communist Party of China or the Government of the 
                People's Republic of China.
                    ``(G) Whether the company is part of (including by 
                reason of being a branch or subsidiary) or tied to 
                (through a series of contracts or parallel corporate 
                incorporations) firms or individuals sanctioned, 
                restricted, or identified as tied to the People's 
                Liberation Army by the United States Government, 
                including under--
                            ``(i) the Military End User List maintained 
                        by the Bureau of Industry and Security of the 
                        Department of Commerce;
                            ``(ii) the Non-SDN Chinese Military-
                        Industrial Complex Companies List;
                            ``(iii) the Unverified List maintained by 
                        the Secretary of Commerce;
                            ``(iv) the List maintained by the Federal 
                        Communications Commission of equipment and 
                        services covered by section 2 of the Secure and 
                        Trusted Communications Networks Act of 2019 (47 
                        U.S.C. 1601);
                            ``(v) the Uyghur Forced Labor Prevention 
                        Act Entity List maintained by the Department of 
                        Homeland Security;
                            ``(vi) the list of covered issuers subject 
                        to a prohibition under section 104 of the 
                        Sarbanes-Oxley Act of 2002 (15 U.S.C. 7214) 
                        maintained by the Securities and Exchange 
                        Commission; and
                            ``(vii) the Withhold Release Orders and 
                        Findings List maintained by the Commissioner of 
                        U.S. Customs and Border Protection.
                    ``(H) The types of products and services offered by 
                the company.
                    ``(I) Whether the company has a contract with the 
                United States Department of Defense.
                    ``(J) Whether the company produces a product or 
                service that is used in the production of aircraft, 
                spacecraft, semiconductor chips and equipment, 
                batteries or battery components, facial recognition 
                technology, artificial intelligence, telecommunications 
                technology, energy production equipment, advanced 
                medical devices, or pharmaceuticals or any such 
                products related to the national technology and 
                industrial base in the United States.
                    ``(K) Whether the company produces goods that would 
                violate U.S. environmental law or U.S. civil liberties 
                law if the goods were produced or used in the United 
                States.
                    ``(L) Any business activities conducted by the 
                company--
                            ``(i) with a privately held firm involved 
                        in China's industrial, technology, and military 
                        modernization efforts based in the People's 
                        Republic of China; or
                            ``(ii) with a Chinese state-controlled 
                        entity.
                    ``(M) Whether the company has ever had an audit of 
                the same type and quality as typically used by an 
                issuer of publicly traded securities.
            ``(2) Definitions.--In this subsection:
                    ``(A) Exchange traded fund.--The term `exchange 
                traded fund' has the meaning given that term under 
                section 270.6c-11 of title 17, Code of Federal 
                Regulations.
                    ``(B) Other definitions.--The terms `Communist 
                Party of China', `Government of the People's Republic 
                of China', `immediate family member', and `PRC' have 
                the meaning given those terms, respectively, under 
                subsection (s)(2).''.
                                 &lt;all&gt;
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