“The US Securities and Exchange Commission (SEC) recognizes the increased exposure of US investors to companies based in or with the majority of their operations in the People’s Republic of China (China-based Issuers) and the SEC’s limited ability to promote and enforce high-quality disclosure standards for China-based Issuers.”

Noting the increased exposure for American investors and the limited ability to enforce the SEC’s own standards is not enough. The SEC is telling Americans to be careful. That’s nice, but individual Americans considering investing in China-based Issuers’ securities are up against the entire government of the Communist Party of China. That government aggressively and, as the SEC reports, beyond legal enforceability, targets American investors. The match up isn’t fair.

US government authorities should place conditions on the China-based Issuers that shift risk away US investors and on to the issuers. Conditions could require issuers to deposit a percentage of capital raised from US investors with the US government pending demonstration of compliance with laws, regulations and accounting standards. The worst abusers of American trust could face higher deposit requirements percentages held for longer periods.