I 118th CONGRESS 2d Session H. R. 9162 IN THE HOUSE OF REPRESENTATIVES July 25, 2024 Mr. Luetkemeyer (for himself, Mr. Moolenaar , and Mr. Newhouse ) introduced the following bill; which was referred to the Committee on Financial Services A BILL To amend the securities laws to require certain disclosures and reports with respect to the exposure of issuers to China and the threat of sudden loss of market access between the United States and China, and for other purposes.

1. Short title This Act may be cited as the PRC Risk Transparency Act . 2. China exposure disclosures (a) Covered issuer disclosures Section 13 of the Securities Exchange Act of 1934 ( 15 U.S.C. 78m ) is amended by adding at the end the following: (t) China exposure disclosures (1) In general Each covered issuer required to file an annual report under subsection (a) shall disclose in that report the following information, to the extent the information would be material to investors, with respect to the period 1 year prior to the disclosure under this subsection: (A) China exposure (i) The percentage of the total revenue and profits of the issuer that are derived from each of— (I) the People’s Republic of China ( China ); (II) Hong Kong; and (III) the Xinjiang Uyghur Autonomous Region. (ii) The percentage and the total value of the capital investment of the issuer that is located in each of— (I) China; (II) Hong Kong; and (III) the Xinjiang Uyghur Autonomous Region. (iii) The percentage and the total value of the supply chain of the issuer that is sourced from each of— (I) China; (II) Hong Kong; and (III) the Xinjiang Uyghur Autonomous Region. (iv) Details on any joint venture with a covered entity, including— (I) the covered entity in the joint venture; (II) the percentage of total revenue and of total profits of the issuer that are derived from the joint venture; and (III) the percentage and the total value of the capital investment associated with the joint venture. (B) Threat of sudden loss of market access (i) The anticipated impact of the scenario described in paragraph (2) on the business operations, supply chain, revenues and profits, and future earnings of the issuer, to the extent it would be material to investors. (ii) Whether the issuer has a plan in place to deal with the scenario described in paragraph (2). (iii) The outlines of the plan described in clause (ii) and any actions the issuer is taking to prepare for the scenario described in paragraph (2). (C) Relationships with certain entities A list of business relationships with any of the following entities, their affiliates, and their subsidiaries: (i) Any entity on the Non-SDN Chinese Military-Industrial Complex Companies List (NS-CMIC List) maintained by the Office of Foreign Assets Control of the Department of the Treasury under Executive Order 14032 (86 Fed. Reg. 30145; relating to addressing the threat from securities investments that finance certain companies of the People’s Republic of China), or any successor order. (ii) Any Chinese military company identified by the Secretary of Defense pursuant to section 1260H of the William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021 ( Public Law 116–283 ; 10 U.S.C. 113 note). (iii) Any entity included on any of the following lists maintained by the Department of Commerce in the following locations of the Export Administration Regulations set forth in subchapter C of chapter VII of title 15, Code of Federal Regulations: (I) The Entity List set forth in Supplement No. 4 to part 744 of the Export Administration Regulations or any successor regulations. (II) The Denied Persons List as described in section 764.3(a)(2) of the Export Administration Regulations or any successor regulations. (III) The Military End User List set forth in Supplement No. 7 to part 744 of the Export Administration Regulations or any successor regulations. (iv) Any entity on which sanctions have been imposed by the Office of Foreign Assets Control of the Department of the Treasury in connection with human rights abuses. (v) Any entity that produces equipment that is prohibited under the Report and Order, Order, and Further Notice of Proposed Rulemaking of the Federal Communications Commission in the matter of Protecting Against National Security Threats to the Communications Supply Chain through the Equipment Authorization Program (ET No. 21–232) and Protecting Against National Security Threats to the Communications Supply Chain through the Competitive Bidding Program (EA Docket No. 21–233; FCC 22–84; adopted November 11, 2022). (vi) An entity on the Uyghur Forced Labor Prevention Act Entity List of the Forced Labor Enforcement Task Force. (D) Ties to the government of the People’s Republic of China A list of the following: (i) Employees with a management role in the issuer that are members of the Chinese Communist Party, including each employee’s role within the issuer. (ii) Any business relationships with an agency or instrumentality of the government of the People’s Republic of China, including the provision of goods, services, or technology to the People’s Liberation Army, the Ministry of State Security, or other security or intelligence services in the People’s Republic of China. (iii) Any investment received from the government of the People’s Republic of China or an agency or instrumentality thereof. (iv) Any requests from any Chinese Communist Party official or agency or instrumentality of the government of the People’s Republic of China (including requests made under the People’s Republic of China Intelligence Law of 2017 or the Counter-Espionage Law) that conflict with the issuer’s obligations under this Act, the Securities Act of 1933, or the Sarbanes-Oxley Act of 2002. (2) Scenario (A) In general The scenario described in this paragraph is a scenario where, owing to an act of Chinese military aggression— (i) the President imposes sanctions on China, Chinese entities, and those who transact with China or Chinese entities of a similar type and magnitude as the sanctions imposed on the Russian Federation, Russian entities, and those who transact with the Russian Federation or Russian entities in response to the Russian Federation’s February 2022 invasion of Ukraine; (ii) the Secretary of Commerce implements export controls with respect to China of a similar type as the Secretary implemented with respect to the Russian Federation following the Russian Federation’s February 2022 invasion of Ukraine; (iii) trade between the United States and China declines by 80 percent and completely ceases in goods with military end-use or dual-use applications; (iv) the Chinese government imposes similar sanctions, export controls, and trade restrictions on the United States and United States companies as the Russian Federation government did following the Russian Federation’s February 2022 invasion of Ukraine; and (v) the Chinese government seizes all China-based assets of American companies that could be re-purposed for military production. (B) Revisions On January 1, 2028, and every 3 years thereafter, the Financial Stability Oversight Council may revise the scenario described under subparagraph (A) by publishing a new scenario that, after consultations with other executive branch officials, seems most likely to occur as a result of Chinese military aggression. (3) Board of directors certification The board of directors of a covered issuer required to make a disclosure under paragraph (1) shall certify that the board has reviewed and affirmed the disclosure. (4) Rulemaking (A) In general Not later than the end of the 60-day period beginning on the date of enactment of this subsection, the Commission shall issue rules to carry out the amendments made by this section. (B) Proprietary information and trade secrets In issuing the rules required under subparagraph (A), the Commission shall, in consultation with the Attorney General and the National Security Council, ensure that issuers may make the disclosure of information required under such rules without disclosing proprietary information or trade secrets. (C) Safe Harbor In issuing the rules required under subparagraph (A), the Commission shall establish rules under which a covered issuer shall not be held liable for statements that were compiled with reasonable due diligence and to the best of the covered issuer’s knowledge. (5) Definitions In this subsection, the following definitions apply: (A) China The term China means the People’s Republic of China, including all Special Administrative Regions. (B) Control The term control has the meaning given in section 800.208 of title 31, Code of Federal Regulations (as in effect on the date of enactment of this subsection). (C) Covered entity The term covered entity means an entity— (i) that is incorporated in, has a principal place of business in, or is organized under the laws of the People’s Republic of China; (ii) the equity securities of which are primarily traded in the ordinary course of business on one or more exchanges in the People’s Republic of China; (iii) that is the Chinese Communist Party, or the state or the government of the People’s Republic of China, as well as any political subdivision, agency, or instrumentality thereof; or (iv) that is subject to the direction or control of any entity described in clause (i), (ii), or (iii). (D) Covered issuer The term covered issuer means— (i) an issuer— (I) with respect to which— (aa) at least 5 percent of the revenue of the issuer is derived from the Chinese market; (bb) at least 5 percent of the capital investment of the issuer, by value, is located in China; or (cc) at least 5 percent of the supply chain of the issuer, by value, is sourced from China; and (II) that has a market capitalization of $1,000,000,000 or more at any point in the previous 365 days; and (ii) an issuer with respect to which— (I) at least 25 percent of the revenue of the issuer is derived from the Chinese market; (II) at least 25 percent of the capital investment of the issuer, by value, is located in China; or (III) at least 25 percent of the supply chain of the issuer, by value, is sourced from China. . (b) Investment adviser disclosures Section 204 of the Investment Advisers Act of 1940 ( 15 U.S.C. 80b–4 ) is amended by adding at the end the following: (g) Report on the loss of market access to China to private funds advised by a covered investment adviser (1) In general The Commission shall, by rule, require each covered investment adviser, for each private fund advised by the covered investment advisor, to disclose to the private fund and the Commission, every quarter, a plain English report that outlines the anticipated effects, to the extent it would be material to investors, of a scenario of the type described in section 13(t)(2) of the Securities and Exchange Act of 1934 on the returns of such fund. (2) Safe harbor A covered investment adviser that makes a disclosure under paragraph (1), if such disclosure is made to the best of the knowledge of the covered investment adviser after reasonable investigation and due diligence and consistent with the fiduciary duty of the covered investment adviser, shall not be held liable for such disclosure. (3) Board of directors certification The board of directors of a covered investment adviser required to make a disclosure under paragraph (1) shall certify that the board has reviewed and affirmed the disclosure. (4) Covered investment adviser defined In this subsection, the term covered investment adviser means an investment adviser with assets under management of $500,000,000 or more at any point in the previous 365 days. (h) Report on exposure to covered foreign entities (1) In general The Commission shall, by rule, require each covered investment adviser to disclose to the Commission, every quarter— (A) for each investment company advised by the covered investment advisor— (i) the total exposure of the investment company to covered foreign entities; (ii) a list of each security issued by a covered foreign entity and held by the investment company; and (iii) the value of each holding; (B) the total exposure of all investment companies advised by the covered investment adviser to covered foreign entities; (C) a list of each security issued by a covered foreign entity and held by an investment company advised by the covered investment adviser; and (D) the value of each holding identified under subparagraph (C). (2) Definitions In this subsection: (A) Covered foreign entity The term covered foreign entity means a covered entity, as defined under section 13(t)(5) of the Securities and Exchange Act of 1934. (B) Covered investment adviser The term covered investment adviser has the meaning given the term under subsection (g)(4). . (c) Investment company disclosures Section 30 of the Investment Company Act of 1940 ( 15 U.S.C. 80a–29 ) is amended by adding at the end the following: (l) Report on exposure to covered foreign entities and variable interest entities (1) In general The Commission shall, by rule, require each registered investment company to disclose to the Commission, every quarter— (A) the total exposure of the investment company to covered foreign entities, including; (i) a list of each security issued by a covered foreign entity and held by the investment company; and (ii) the value of each holding; and (B) the total exposure of the investment company to variable interest entities, including— (i) a list of each security issued by a variable interest entity held by the investment company; and (ii) the value of each holding. (2) Covered foreign entity defined In this subsection, the term covered foreign entity means a covered entity, as defined under section 13(t)(5) of the Securities and Exchange Act of 1934. . (d) Variable interest entity exposure Section 204(b)(3)(C) of the Investment Advisers Act of 1940 ( 15 U.S.C. 80b–4(b)(3)(C) ) is amended by inserting before the semicolon the following: , including total exposure to variable interest entities, a list of each security issued by a variable interest entity held in the fund, and the value of those securities . (e) No expansion of liability No provision under the amendments made by this section requiring the disclosure of information shall give rise to a claim under the Securities Act of 1933 or the Securities Exchange Act of 1934 unless the disclosure is both— (1) false or misleading; and (2) material to an investment decision such that there is a substantial likelihood that a reasonable investor would consider the information important in assessing the risk-adjusted financial returns from the investment decision.