Mr. Chairman, I want to thank you for extending me the privilege of testifying here before you and this panel of distinguished Senators today. As you know, the subject relates to a most important matter of our economic and national security.
I would also commend you, Mr. Chairman, for your prudence in leading the way and introducing this identical piece of legislation, "the U.S. Market Security Act" in the Senate last week. It is a very forward thinking measure and it is certainly comforting to me to join in support of such a respected and influential member of this Congress as yourself. That's why I am so proud to have sponsored the companion legislation, H.R. 2772, in the other body and to be here today to speak to its significance as we enter the next century.
First and foremost, Mr. Chairman, let me just say that this legislation is in no way in response to, or in anticipation of, any specific market trends. Let me be clear. I am in no way trying to predict or interfere with the tremendous free market system which we have prospered under throughout the history of this nation.
Before coming to Congress 20 years ago, I was a partner in an investment firm charged with the awesome responsibility of investing the life savings of our clients. Back in those days we dealt primarily with a national economy. Today it is hard to separate the national and global economies and the investments that support them.
That being said, I am here to try and preserve and enhance the safeguards we have in place that make our free market trading system the envy of the world. What I mean is, I'm most concerned about protecting the access of the investor to the most accurate, fair, and sound information pertaining to stock listings so they can make educated, informed choices. That is what makes our system of trading on Wall Street and elsewhere in the free market so successful; the sanctity of the rights of the investor.
And as we enter a new century and new age of more global competition and globally linked markets,, it is imperative that we preserve those traits that have made American markets and the successes of the American investor second to none.
Mr. Chairman, in large part, the reason our markets and our investors have remained so competitive and open is because of the yeoman's work of the Securities and Exchange Commission. They are charged with a tremendous task of making sure our markets and most importantly, our investors, which include a growing population of middle and working class Americans whose retirement and pension funds are dependent on its success, are protected. That means making sure they are not manipulated through insider trading, questionable accounting methods, and a host of other mischievous activities.
As a matter of fact in many circles in the Federal government, the SEC is often identified as the marines of the civilian side of the executive branch. That's because, like the Marine Corps, they are lean, of single mind and purpose, and committed to getting the job done no matter who they take on, even if it's Wall Street giants like Boesky and Milken.
And that's why the bill that I have introduced, along with you Mr. Chairman, would place a sentry on guard within the SEC devoted to watching and analyzing foreign stock listings that may be traded on our markets to make sure they comply with our highest standards in law.
Specifically, the bill calls for a national security office within the SEC that can devote its time to identifying any irregularities or manipulation of foreign stocks which may threaten the security of our markets should our capital be invested in them. And that goes for stocks from anywhere in the world.
Now why is this necessary? Well, it is responsive both to current trends and forward looking to the age where economic warfare may supersede more traditional forms of warfare.
With the emergence of the new global economy creating mega-mergers involving many foreign conglomerates some of which are reported to involve international mafia connections and drug cartel monies.
This office of national security within the SEC is an absolute must! In other words, we need a special watchdog agency specifically committed to making sure no entity can engineer fluctuations. That could bring our markets down. Just look at the repercussions we saw last week after a period of downswings in the Asian markets. God forbid we were somehow more intimately tied to those markets.
And how might we be someday you ask? Well, one foreseeable example would be the trading of People's Republic of China owned companies on the stock exchange. The communist government in China is in the midst of offering a whole string of their controlled businesses on the Hong Kong markets with the intent of listing them on the New York Stock Exchange. China Telecom is just the most recent to go up on the trading board in both places.
What's most disconcerting about that is the communist Chinese ongoing commitment to Marxist/Leninism and a command economy.
We all know that their economy is policy driven and despite overtures from the PRC including from President Mang, the fact remains they are committed to an economic policy of communist government control.
And don't just take my word for it. We need only look again at the creed of the Chinese Communist Party and a whole host of recent press stories surrounding the Chinese government's involvement and the association of investors like Li Ka-shing with these so called "red chip" offerings.
A Bloomberg wire story from a few weeks ago says it all. It describes Minister Wu Jichuan's statement that the PRC would ease accounting rules to boost company profits. That is just cynical, manipulative and direct evidence of fraud. The highest priority of American securities law is to provide accurate information to the American investor, and the PRC's actions flout that objective.
I would offer these articles and request that they appear in the record at this time. They effectively demonstrate the sort of concerns that should raise an alarm with all of us in this Congress and drive home the need for an overseeing authority to examine the prospects of having the fate of American capital and investors tied to communist government controlled stock.
And that in a nutshell is the motivation for this bill. It is about safeguarding the hopes and dreams of Americans whose pension funds and financial security depend on the sanctity of our free market system. We need to make doubly sure that a cloud of uncertainty and manipulation never hang over their future prosperity or that of our economy.
Giving the SEC the authority and resources to stand guard against such encroachments and attacks, Mr. Chairman is what this bill is all about.
I appreciate the opportunity to air these concerns before all of you today. I hope that this panel of distinguished Senators will see the wisdom in building in this necessary shield for our invaluable market funds and economic principles against those who may seek to infiltrate and destroy them.
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