DealLawyers.com Blog

In October 2022, the Treasury Dept. issued its first ever CFIUS Enforcement & Penalty Guidelines. Under the Guidelines, three types of conduct may constitute a violation, including failure to file, non-compliance with CFIUS mitigation agreements or conditions and material misstatements or omissions from filed information or false or incomplete certifications. Since the publication of those Guidelines, CFIUS has completed at least 6 enforcement actions that resulted in monetary penalties ranging from approximately $1 million to $60 million. This Ropes & Gray alert notes that this signals a significant uptick in enforcement activity since “between 1975 and 2022, CFIUS publicly reported only two penalties, both relating to failures to comply with CFIUS mitigation requirements.”

The alert notes that CFIUS also summarized conduct that has resulted in the issuance of a DONT Letter — which is issued as an alternative or as a precursor to a monetary penalty when “a CMA has ‘determined that one or more violations occurred, but [has] . . . decided not to pursue further enforcement remedies or [to] require additional information to assess if a penalty is warranted'”:

– failure to file a mandatory declaration (but, notably, only in cases where there was a first-time offense, and the lack of a filing did not lead to national security harm)
– failing to limit the receipt and distribution of specified information to a segregated network, as required under an LOA
– transferring assets to a company controlled by foreign persons, in violation of an NSA or other CFIUS mandate
– failing to prevent unauthorized access to specified intellectual property

Given these enforcement action summaries, the alert has these reminders:

– NSA Compliance is Mandatory: In connection with publication of the Guidelines, Assistant Secretary of the Treasury for Investment Security Paul Rosen stated, “Today’s announcement sends a clear message: Compliance with CFIUS mitigation agreements is not optional, and the Committee will not hesitate to use all of its tools and take enforcement action to ensure prompt compliance and remediation, including through the use of civil monetary penalties and other remedies.”³ Parties to NSAs are on notice of the potential consequences of non-compliance. In addition, parties negotiating NSAs should be transparent about any practical challenges that may arise in complying with specific mitigation proposals, in an effort to arrive at a mitigation framework that is attainable.

– Anonymity is Not Guaranteed: Historically, the Committee’s emphasis on confidentiality has extended to publication of enforcement activity. The T-Mobile case marks the first time that the Committee has publicly identified a party to an enforcement action. This unprecedented step suggests the possibility that future enforcement actions will not be kept anonymous.

– Meredith Ervine