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ASA Submits Testimony to the Select Committee on the Chinese Communist Party

On May 17, 2023, the American Securities Association submitted a letter for the record in advance of the U.S. House of Representatives Select Committee on the CCP’s hearing titled “Leveling the playing Field: How to Counter the Chinese Communist Party’s Economic Aggression.”

“We applaud the bipartisan efforts of this committee to review and address the economic and national security threats the Chinese Communist Party poses to American investors and our capital markets,” ASA CEO Chris Iacovella said. “ASA urges this Committee to close the “passive index loophole” which allows passive index funds and index providers to direct American investor dollars into mainland Chinese companies by including them in international or emerging market indices.

Iacovella added, "Investors have no idea that by investing in an index fund, they are sending their savings to Chinese companies that avoid basic disclosure, financial reporting, and governance standards or are controlled by the Chinese Communist Party. Closing this loophole must also apply to every bond index that includes Chinese-Yuan denominated bonds where the money goes directly from American investors to the CCP, which wantonly destroys the environment and two separate administrations have said is committing ‘crimes against humanity’ and ‘genocide’ against its own people.”


The ASA has been a leading voice and advocate when it comes to protecting American investors and the integrity of our markets from CCP-controlled companies that are rife with fraud or seek to do harm to the United States and our allies. ASA has called on the SEC to swiftly and fully implement the Holding Foreign Companies Accountable Act, a bill in which ASA was the lead advocate, and sent a letter to members of the Financial Services Committee ahead of a hearing examining risks China poses to American investors and U.S. capital markets. ASA has also submitted testimony for the record ahead of a 2021 U.S.–China Economic and Security Review Commission hearing on U.S. investment in China’s capital markets and the military-industrial complex. In a letter to Senate Banking Committee earlier this year, ASA called on Congress to create a centralized list of every foreign company identified across every agency of the U.S. government that is affiliated with foreign governments that are adversarial to America or actively seeking to undermine the economic and national security interests of the United States. We believe this will also help to stop the flow of American investor capital to our adversaries.

ASA recommends Congress force the SEC to:

  • Deregister every Chinese company that doesn’t meet the same company-specific governance, disclosure, audit, and financial reporting standards as U.S. companies;

  • Force index funds to remove and exchanges to delist every Chinese company that is on the OFAC sanctions list, the U.S. Department of Defense list of Communist Chinese military companies, or the U.S. Department of Commerce ‘entity list’;

  • Close the passive index loophole which (1) for equities allows index funds to steer American investor savings into opaque and financially questionable Chinese companies listed on mainland Chinese exchanges (i.e. A-shares), and (2) for bonds sends money directly to the CCP though bond indexes that purchase Chinese-Yuan denominated bonds;

  • Create a consolidated, centralized list of all prohibited businesses so the American public can easily identify which foreign entities no longer have access to U.S. capital or U.S. markets; and

  • Clearly and publicly outline the legal redress or lack thereof that American investors can seek if they are defrauded or harmed in any way by registered Chinese companies or ETFs who hold an index of Chinese companies (i.e. A-shares).


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