Today, the U.S. Department of the Treasury (Treasury), as Chair of the Committee on Foreign Investment in the United States (CFIUS), issued a final rule to enhance certain CFIUS procedures and sharpen its penalty and enforcement authorities. The final rule is the first substantive update to the monitoring and enforcement provisions of the CFIUS regulations since the implementation of the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA), which amended CFIUS’s governing statute (section 721 of the Defense Production Act of 1950). The final rule issued today follows a proposed rule issued in April and responds to public comments received in response to the proposed rule.
“This rule enhances CFIUS’s ability to vigorously defend the national security of the United States by ensuring our investment screening regime has a sharper scalpel to more quickly and effectively address national security risks that arise in CFIUS reviews,” said Assistant Secretary for Investment Security Paul Rosen.
CFIUS is authorized to review certain transactions involving foreign investment into U.S. businesses and certain transactions by foreign persons involving real estate in the United States in order to determine the effect of such transactions on the national security of the United States. CFIUS enforces transaction parties’ compliance with its statute and regulations, as well as agreements entered into and conditions and orders imposed under such authorities, through its authority to impose civil monetary penalties and seek other remedies. In recent years, CFIUS has enhanced its compliance and monitoring capabilities, along with its ability to identify and investigate transactions that were not notified to CFIUS. This final rule reflects and builds upon those enhancements to help CFIUS accomplish its national security mission consistent with the United States’ open investment policy.
The final rule enhances CFIUS’s authorities through the following key changes:
- Expanding the types of information CFIUS can require transaction parties and other persons to submit when engaging with them on transactions that were not filed with CFIUS;
- Allowing the CFIUS Staff Chairperson to set, as appropriate, a timeline for transaction parties to respond to risk mitigation proposals for matters under active review to assist CFIUS in concluding its reviews and investigations within the time frame required by statute;
- Expanding the circumstances in which a civil monetary penalty may be imposed due to a party’s material misstatement and omission, including when the material misstatement or omission occurs outside a review or investigation of a transaction and when it occurs in the context of CFIUS’s monitoring and compliance functions;
- Substantially increasing the maximum civil monetary penalty available for violations of obligations under the CFIUS statute and regulations, as well as agreements, orders, and conditions authorized by the statute and regulations, and introducing a new method for determining the maximum possible penalty for a breach of a mitigation agreement, condition, or order imposed;
- Expanding the instances in which CFIUS may use its subpoena authority, including in connection with assessing national security risk associated with non-notified transactions; and
- Extending the time frame for submission of a petition for reconsideration of a penalty to CFIUS and the number of days for CFIUS to respond to such a petition.
In assessing compliance and whether to bring an enforcement action in a particular case, CFIUS will continue to evaluate the facts and circumstances surrounding the conduct including the aggravating and mitigating factors described in the CFIUS Enforcement and Penalty Guidelines.
The final rule will become effective 30 days after publication in the Federal Register and is available at https://www.cfius.gov/.
