Montana Auditor Joins Coalition Calling for SEC to Delist Chinese Companies

HELENA — Montana State Auditor James Brown joined a nationwide coalition of state financial officers calling on the Securities and Exchange Commission to investigate and potentially delist Chinese companies from U.S. stock exchanges due to fraud concerns and national security risks.

In a press release issued Monday, Brown’s office said the effort is aimed at “protecting Montana consumers, investors, and America’s national security interests” by targeting Chinese companies that fail to meet anti-fraud standards and transparency requirements.

The coalition letter, signed by state financial officers across the country, highlights several concerns about China-based companies trading on American exchanges, including audit deficiencies, interference from the Chinese Communist Party, and the use of “variable interest entity” structures that may leave American investors without real ownership stakes.

According to Brown’s office, over 90% of U.S.-listed Chinese firms use “VIE” shell companies that are essentially clones of the real Chinese companies they appear to represent.

“This means American investors don’t have real ownership, there is massive uncertainty if China decides to pull the rug, and it leaves a massive doorway open for fraud,” the press release states.

The coalition letter cites the Holding Foreign Companies Accountable Act and previous executive orders as precedent for increased scrutiny of Chinese companies. It argues that current transparency and audit requirements for China-based issuers are insufficient to protect American investors and comply with U.S. securities laws.

The coalition letter provides specific examples of audit failures, including civil penalties totaling $7 million imposed on PwC China and PwC Hong Kong for widespread deficiencies, and $940,000 in fines for Shandong Haoxin for falsifying an audit report. The letter also cites Luckin Coffee, which “notoriously faked over $300 million in reported sales.”

“American inspectors have already reviewed many of these companies and found serious concerns in their reports — even including falsified documents,” Brown’s office said, noting this creates “an obvious risk of fraud that could leave Montanans holding the bag.”

The letter also raises national security concerns, particularly regarding Chinese insurance companies operating in American markets. Brown’s office noted that “CCP cells are embedded in every Chinese company, leaving our nation vulnerable to undue influence in one of our most important sectors — your healthcare and insurance.”

“I am proud to have signed on to this important letter,” Brown said in the press release. “Montanans should not be forced to roll the dice on companies that are controlled by the CCP. If China won’t play by our rules, then they should not be allowed in our markets. Period.”

Brown framed the issue as part of his consumer protection mandate as state auditor.

“As your Auditor, my job is to protect you — the people of Montana. Whether it’s a scam in Sanders County or a Beijing billionaire, the rules are the rules, and I will continue to ensure that they are enforced to protect the people of Montana,” he said.

The coalition letter urges the SEC to assess whether current audit inspections of China-based companies are adequate and to enforce compliance with disclosure, fraud, and internal control regulations under U.S. securities law.

Brown’s office characterized the effort as part of “President Trump’s America First investment policy” and described it as “a great bipartisan step towards strengthening protections for Montana consumers.”

Western Montana News reached out to Brown’s office with follow-up questions about specific impacts on Montana consumers and investors, but did not receive a response.