Luckin Coffee Inc.’s recent disclosure that it’s being investigated for accounting irregularities in the U.S. and China has exacerbated concerns about potential misconduct. Since reaching a high of $50 a share in January, the fast-growing Chinese chain has fallen more than 90% in Nasdaq trading, a plunge that’s erased about $11.5 billion in market value.

The coffee chain plunged after disclosing accounting investigation

“It’s asinine that we’re giving Chinese companies the opportunity to exploit hardworking Americans,” said Senator John Kennedy, a Louisiana Republican who’s sponsoring the bill with Maryland Democrat Chris Van Hollen.

Outspoken Lawmaker
Kennedy, known for being outspoken, has been quick to attack those he thinks are undermining his effort. After learning that Securities and Exchange Commission officials had discussed revisions to his legislation with House lawmakers, Kennedy accused the agency of lobbying against it in a Fox News interview.

While the agency denied the charge, it had given House staff members a long list of suggested changes to the Senate bill, documents obtained by Bloomberg News show. The SEC ultimately offered a much narrower set of recommendations that are mainly aimed at limiting the legislation’s impact on U.S. corporate subsidiaries operating in China.

Still, the episode served as a warning to Wall Street about the backlash it would likely face for aggressively opposing the legislation.

SEC Chairman Jay Clayton supports the Senate bill and believes the status quo of Chinese companies listing on American exchanges without adhering to U.S. regulations is “unacceptable,” Chandler Costello, an agency spokeswoman, said in a statement. Before joining the SEC, Clayton was a partner at law firm Sullivan & Cromwell, where he worked on Alibaba’s 2014 U.S. IPO.

The delisting measure appears to have momentum, and is likely to pass the House, lobbyists said. Financial Services Committee Chairwoman Maxine Waters has told people that she will not impede its progress as long as the Senate agrees to pass a separate bill that requires public companies to report annually on the ethnic, racial and gender diversity of top executives and board members.

In a Fox Business interview last month, Trump indicated he’s frustrated that Chinese businesses aren’t following U.S. accounting rules, though he cautioned that companies might just move their stock listings to London or Hong Kong if the U.S. got tougher on compliance. Trump subsequently ordered the Treasury Department, SEC and other agencies to study the issue, and submit recommendations to him by early August.

Exchanges’ Lobbying
NYSE and Nasdaq would be among the hardest hit if the U.S. kicks out Chinese businesses because they would lose millions of dollars in fees the companies pay to be listed on their exchanges. Their lobbyists have succeeded in killing similar legislative efforts in the past.