The penalty and enforcement authorities of the Committee on Foreign Investment in the U.S. will be strengthened under a new final rule that will take effect Dec. 26. A senior Treasury Department official said this rule, which is largely unchanged from the proposed version issued earlier this year, ensures that “our investment screening regime has a sharper scalpel to more quickly and effectively address national security risks that arise in 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 making 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.
- increasing from $250,000 to $5 million the maximum civil monetary penalty available and introducing a new method for determining the maximum possible penalty for a breach of a mitigation agreement, condition, or order imposed
- expanding 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
- 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
- expanding the instances in which CFIUS may use its subpoena authority, including in connection with assessing national security risk associated with non-notified transactions
- allowing CFIUS to set a deadline of no fewer than three days for transaction parties to respond to risk mitigation proposals for matters under active review
- extending the timeframes for submitting a petition for CFIUS to reconsider a penalty and for CFIUS to respond
The measures included in this rule may address what the Congressional Research Service has called intensified debate over the additional national security risks posed by foreign investments by firms directed, controlled, or funded by China or other countries of concern, particularly in emerging technology, steel, and agriculture.
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