The penalty and enforcement authorities of the Committee on Foreign Investment in the U.S. would be strengthened under a new Treasury Department proposed rule that a senior official said is designed to “more effectively deter violations, promote compliance, and swiftly address national security risks in connection with CFIUS reviews.”
CFIUS has the authority to review, block, and even unwind certain transactions involving foreign investments in U.S. companies or operations that may jeopardize national security. CFIUS’ powers were greatly expanded by the 2018 Foreign Investment Risk Review Modernization Act, which broadened the committee’s jurisdiction to include emerging and foundational technologies, added new national security factors for CFIUS to consider, and strengthened CFIUS’ ability to protect critical infrastructure from foreign government disruption. FIRMMA also created a requirement for parties to submit a mandatory declaration (essentially a prior notification filing) to CFIUS for certain investments by non-U.S. individuals in any U.S. business that produces, designs, tests, manufactures, fabricates, or develops one or more critical technologies.
CFIUS can impose civil monetary penalties and seek other remedies for violations of the relevant law (Section 721 of the Defense Production Act), associated regulations, or related mitigation orders, conditions, or agreements.
Treasury is now proposing to make the following updates to the CFIUS regulations to build on the penalty and enforcement guidelines issued in 2022 and reflect lessons learned in the course of the department’s monitoring, compliance, and enforcement work.
- increase from $250,000 to $5 million the maximum civil monetary penalty available and introduce a new method for determining the maximum possible penalty for a breach of a mitigation agreement, condition, or order imposed
- expand the circumstances in which a civil monetary penalty may be imposed due to a party’s material misstatement and omission, including when it occurs (1) outside a review or investigation and (2) in the context of the Committee’s monitoring and compliance functions
- expand 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
- expand the instances in which CFIUS may use its subpoena authority, including when seeking to obtain information from third persons not party to a notified transaction and in connection with assessing national security risk associated with non-notified transactions
- institute an extendable timeline for transaction parties to respond to risk mitigation proposals for matters under active review
- extend the timeframes for submitting a petition for CFIUS to reconsider a penalty and for CFIUS to respond
Comments on the proposed rule will be accepted for 30 days following its publication in the Federal Register.
For more information on how this rule could impact your business, or help in formulating or submitting comments, please contact attorney Kristine Pirnia at (202) 730-4964 or via email.
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