Stop letting foreign executives cheat American investors
The American people are tired of watching the U.S. receive the short end of the stick in our global business deals. They don’t understand why some have let other countries lie, steal and cheat in our marketplaces, and they reelected President Trump to help us unstack the deck.
During his first term, President Trump worked to level the playing field for American companies and investors. He signed my bill, the Holding Foreign Companies Accountable Act, into law to allow the Securities and Exchange Commission to delist Chinese companies from American stock exchanges if they refuse to open their books to our regulators.
It’s common sense. Chinese companies that want to profit from American investors should be held to the same transparency standards as American companies. In the years since President Trump signed this bill into law, Chinese companies have begun to comply with American disclosure requirements. Regulators have already issued millions of dollars in sanctions and penalties against Chinese companies and individuals who were cooking their books or otherwise violating our laws to the detriment of American investors.
Now we have an opportunity to build upon this work by stopping the executives of foreign companies from gaming our markets through insider trading.
Today, American executives of publicly traded companies must disclose to investors when they plan to make certain transactions of their own company’s stock. Regulators require most insiders to make this disclosure at least 48 hours before they finalize the stock sale. This is known as the “cooling off” period, and it mitigates the advantage of insider knowledge by giving outside investors a chance to consider buying or selling in the meantime.
We take insider trading seriously in this country. Federal prosecutors throw dozens of Americans in jail each year for trying to cheat the system. The current law, however, does not hold foreign investors to this same standard.
Inside investors from other countries, including executives of Chinese and Russian companies, are exempt from the same disclosures and SEC oversight that American executives must comply with when trading company stock. This double standard has cost American investors billions of dollars to the benefit of Chinese and Russian businessmen.
When American executives make disclosed sales of company stock, the average share prices typically increase by 2 percent. The average undisclosed insider trade by Chinese executives, however, preceded a 21 percent drop in share price, and the average Russian executive’s sale came before a 26 percent price decline. A study from the Wharton School estimates that foreign executives were able to dodge losses of more than $10 billion while leaving the devalued stock in the hands of American investors.
Americans are the boldest, most savvy investors on the planet. It is a privilege to access American markets. Yet these weak laws allow foreign executives — many of whom are from countries that hate us — to blindside American investors without consequence.
We should not make it easier for foreign executives to rip off our investors with insider trades. Americans want a level playing field, and Congress must deliver.
Sen. Chris Van Hollen (D-Md.) and I are reintroducing the Holding Foreign Insiders Accountable Act. This bill would ensure that all executives, regardless of where they live, must immediately disclose their trades. It would give American investors — and SEC regulators — a chance to evaluate the transactions and respond accordingly.
A foreign passport should not be a get-out-of-jail-free card for insider trading in the American stock exchange. There is absolutely no reason why American executives should face a higher standard of transparency than their foreign counterparts.
Let’s build on the momentum of Trump’s first term to protect American investors from foreign executives who don’t respect our markets. I urge my congressional colleagues to join me in eliminating this double standard.
John Kennedy is the junior senator from Louisiana. He is a member of the Senate Banking Committee.
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