What You Need to Know About CFIUS’s Increased Penalties
The U.S. government is stepping up its scrutiny of foreign investments to safeguard national security.
The Committee on Foreign Investment in the United States (CFIUS) has recently made headlines with a significant uptick in penalties and proposed regulatory changes.
CFIUS issued a record-setting four penalties last year and conducting numerous investigations into non-compliance with mandatory filing requirements. This includes the committee’s first voluntary self-disclosure for a potential failure to file, although no fines were imposed due to specific circumstances.
These actions reflect CFIUS’s enhanced focus on national security and compliance, which corporate treasurers must consider in their risk management strategies.
One of the most notable changes proposed by CFIUS is the increase in maximum civil penalties from $250,000 to $5 million per violation for material misstatements, omissions, violations of mitigation agreements, or failures to submit mandatory filings.
Additionally, CFIUS is expanding its subpoena authority, allowing the committee to request more information from transaction parties and third parties involved in non-notified transactions.
CFIUS’s ability to request information related to non-notified transactions has also been broadened. The committee can now inquire about whether a transaction creates national security risks, allowing for more comprehensive preliminary fact-finding before any formal filing is made.
Another significant change is the introduction of a three-business-day period for parties to respond to proposed mitigation terms during an investigation. This tighter timeframe is intended to expedite the review process but may place additional pressure on transaction parties to quickly formulate responses to CFIUS’s proposals.
The heightened enforcement and regulatory changes by CFIUS mean that businesses must be more vigilant in their compliance efforts. Thorough CFIUS analysis and adherence to mitigation agreements are crucial to avoid hefty penalties and ensure smooth transaction processes.
Given the increased scrutiny, businesses and investors should adopt strategies to manage the heightened regulatory environment effectively.
Early cooperation with CFIUS and seeking experienced counsel for navigating mitigation agreements can mitigate risks and foster a positive relationship with the committee.