DealLawyers.com Blog

Last week, the Treasury Dept. issued its first ever CFIUS Enforcement & Penalty Guidelines.  According to the Treasury’s press release announcing the guidelines, they are intended to “provide the public with important information about how CFIUS will assess whether and in what amount to impose a penalty or take some other enforcement action for a violation of a party’s obligation, and factors that CFIUS may consider in making such a determination, including aggravating and mitigating factors.”

Section 721 of the Defense Production Act of 1950 authorizes the Committee to impose monetary fines and pursue other remedies for violations of that section & related regulations, mitigation orders and agreements.  This Simpson Thacher memo summarizes the three types of conduct that the Guidelines say may constitute a violation:

– Failure to File. Failure to timely submit a mandatory declaration or notice, as applicable.

– Non-Compliance with CFIUS Mitigation. Conduct that is prohibited by or otherwise fails to comply with CFIUS mitigation agreements, conditions or orders (“CFIUS Mitigation”).

– Material Misstatement, Omission or False Certification. Material misstatements in or omissions from information filed with CFIUS, and false or materially incomplete certifications filed in connection with assessments, reviews, investigations or CFIUS Mitigation, including information provided during informal consultations or in response to requests for information.

The Guidelines also state that aggravating and mitigating factors will be taken into accounting in determining whether to assess a penalty. Potential aggravating and mitigating factors include the impact of an enforcement action on ensuring accountability and future compliance, the level of harm associated with the violation, whether the violation was negligent or intentional, efforts undertaken to respond and remediate the violation (including self-reporting), and the sophistication of the parties & their compliance record.

– John Jenkins