OKLAHOMA CITY – Attorney General Gentner Drummond wants answers from the world’s top asset managers to determine if they are misrepresenting and omitting essential disclosures regarding Chinese investments.
His concerns and those of 16 other attorneys general are outlined in a letter sent today to BlackRock, StateStreet, Invesco, JPMorgan, Goldman Sachs and Morgan Stanley. Drummond and the coalition contend asset managers appear to be misrepresenting and concealing the risks of Chinese investments to their investors. Even though China is a foreign adversary of the United States, BlackRock and other asset managers imply investing in China has similar risks to investing in other countries.
The misstatements and omissions about investments in China may violate components of asset managers’ fiduciary duty of care to investigate the facts underlying an investment and implicate state laws on securities and on unfair and deceptive acts and practices.
“It is deeply troubling that BlackRock and similar asset managers are concealing information from their investors about Chinese market risks,” Drummond said. “There is a disturbing pattern among these firms of whitewashing the very real threats posed by Communist China. I intend to get answers from these asset managers and to hold them accountable to the law.”
In addition to concealing the risks associated with investing in a foreign adversary of the U.S., BlackRock fails to disclose China’s intention to invade Taiwan and when its funds rely on investments that could be ruled illegal at any time by the Chinese Communist Party (CCP). Additionally, BlackRock refers to China’s Uyghur forced labor and genocide as “religious and nationalist disputes” rather than calling it what it is.
The CCP is actively suppressing accurate information and has manipulated stocks. Instead of disclosing that information to shareholders, BlackRock implies that the quality of Chinese audits are simply not up to U.S. standards.
It appears the asset managers’ involvement with Chinese investments may conflict with their duty of loyalty to their clients, given the CCP’s interference with its markets and companies. For example, BlackRock began aggressively pushing Chinese investments to the world shortly after given permission from the CCP despite the fact China had been designated a foreign adversary by the U.S. only months before. BlackRock’s recommendations have since caused losses for investors and “may have breached BlackRock’s fiduciary duty of loyalty,” according to the letter.
The coalition asserts that either the asset manager misstatements and omissions are a result from a conflict of interest from the intense pressure China places on firms seeking access to Chinese investors or stem from an inability to investigate the facts accurately, given interference and distortion from the CCP.
To aid in potential ongoing investigations, Drummond and his colleagues are demanding the asset managers answer questions regarding their Chinese investments by March 10.
Attorneys general from Alabama, Idaho, Indiana, Iowa, Kansas, Mississippi, Missouri, Montana, North Dakota, Ohio, South Carolina, South Dakota, Texas, Virginia, West Virginia and Wyoming also signed the letter.
