No China in Index Funds Act

An index fund may not invest in a Chinese company.

With respect to an index fund with an investment in a Chinese company on the date of enactment of this Act, subsection (a) shall not apply to such investment during the 180-day period beginning on the date of enactment of this Act.

Any person who violates this section shall be subject to a civil penalty in an amount not to exceed the greater of—

(A) $250,000; or

(B) an amount that is twice the amount of the transaction that is the basis of the violation with respect to which the penalty is imposed.

For purposes of paragraph (1)(B), the term “amount of a transaction” means—

(A) with respect to a purchase that violates this section, the purchase price; and

(B) with respect to the holding of an investment that violates this section, the fair market value of the investment at the time of the violation.

The Securities and Exchange Commission may issue such rules as may be necessary to carry out this section.

In this section:

The term Chinese company means a company—

(A) incorporated or otherwise organized in China;

(B) that has a majority of its assets or employees located in China;

(C) owned by, controlled by, or subject to the jurisdiction or direction of the government of the People’s Republic of China;

(D) where a majority of the company’s value depends on the revenues, profits, market capitalization, assets, or the value of a security (including options to purchase or sell) of a company described under subparagraph (A), (B), or (C), as determined by the Securities and Exchange Commission; or

(E) where a company described under subparagraph (A), (B), or (C) has control, as defined under section 230.405 of title 17, Code of Federal Regulations, of the company, as determined by the Securities and Exchange Commission.

The term hedge fund means an issuer that would be an investment company but for paragraph (1) or (7) of section 3(c) of the Investment Company Act of 1940 (15 U.S.C. 80a–3(c)).

The term index fund means an investment company or hedge fund that is designed to track an index of securities or a portion of such an index.

The term investment company has the meaning given that term under section 3 of the Investment Company Act of 1940 (15 U.S.C. 80a–3).