September 28, 2023

HFS National Security Subcommittee Chair Questions SEC/FINRA On Broker-Dealers' Ties to China

House Financial Services ("HFS") Subcommittee Chair Blaine Luetkemeyer (R-MO) requested information from the SEC and FINRA on their efforts to address "serious" national security issues raised by broker-dealers that have ownership connections to the Chinese Communist Party ("CCP").

In a Letter to SEC Chair Gary Gensler and FINRA President and CEO Robert W. Cook, Representative Luetkemeyer, Chair of the HFS Subcommittee on National Security, Illicit Finance and International Financial Institutions, raised concerns that the SEC and FINRA continue to allow broker-dealers with ownership ties to the CCP to operate in the United States. He questioned the agencies on how they are assuring the investing public on the safety of personally identifiable information and financial data. He noted that neither regulator has authority to oversee operations or employees in China.

Mr. Gensler asked the agencies why the SEC Divisions of Trading and Markets and Investment Management have yet to release guidance and a sample letter similar to the sample letter provided by the Division of Corporation Finance addressing the disclosure obligations of companies with direct or indirect ties to China. He also asked for responses to questions on:

  • broker-dealers and SEC registered investment advisers with direct or indirect ties to the CCP;
  • application of examination and enforcement authorities to (i) China-based employees and the operations of SEC/FINRA-registered broker-dealers and (ii) China-based owners of broker-dealers; and
  • authority to compel China-based employees of broker-dealers and SEC-registered investment advisers to provide information.

He requested responses from the agencies by October 26, 2023

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