DealLawyers.com Blog

Late last week, the Treasury Department announced the issuance of a Notice of Proposed Rulemaking “to enhance certain CFIUS procedures and sharpen its penalty and enforcement authorities.” This Covington alert explains that the rulemaking “proposes revisions to CFIUS’s existing authorities in the context of non-notified transactions, mitigation agreement negotiations, and the imposition of civil monetary penalties.” While in some respects the changes would “largely codify existing practice” the alert says:

Nevertheless, the rulemaking is notable insofar as it reflects a continued evolution of CFIUS, under current leadership, toward emphasizing enforcement and monitoring compliance. This evolution marks a material departure from CFIUS’s historical emphasis, which prioritized applying the Committee’s authorities surgically to address national security risks that were not addressable through other authorities, promoting open investment, and operating at a speed so as not to disrupt M&A activity unnecessarily. Parties who interact with the Committee—in the context of transactions under review, transactions that were not filed, and compliance with mitigation conditions—would be well advised to track that continued evolution closely.

Specifically, the proposed amendments would:

(1) expand CFIUS’s authority to request (and require) information from parties, including outside the context of a transaction that is under review by the Committee;

(2) require parties who are negotiating mitigation terms with CFIUS to “substantively respond” to mitigation proposals within three business days; and

(3) expand CFIUS’s authority to issue larger civil monetary penalties in more contexts for violations of Parts 800 and 802 or mitigation agreements with CFIUS.

The alert discusses each of these proposals in detail. We’re posting resources in our “National Security Considerations” Practice Area.

– Meredith Ervine