Today, in a notice of proposed rulemaking (NPR), the Treasury Department is proposing expanding its authority over the Committee on Foreign Investment in the U.S. (CFIUS) review process which determines whether commercial transactions should be approved or disapproved on national security grounds.

Treasury is proposing:

• Requiring companies to provide CFIUS with information even about transactions where no CFIUS review notice has been filed;
• Increasing civil penalties for misrepresentations of information required for CFIUS review (“declarations”);
• Increasing penalties for information not required for CFIUS review but submitted in accordance with a CFIUS request for information;
• Allow CFIUS to request information on national security grounds even where companies do not believe that the transaction requires CFIUS notification;
• Require companies to respond to CFIUS requests for information on compliance with CFIUS mitigation agreements;
• Require companies to respond to CFIUS requests for information with past CFIUS reviews or investigations;
• Giving CFIUS subpoena power for these information requests, even from 3^rd parties, where subpoena power is not already defined;
• Increase penalties for failure to comply with mandatory declarations or information from $250,000 or the value of the transaction to $5 million or the value of the transaction;
• Establish a firmer timetable for companies to respond to CFIUS requests (subject to negotiation with CFIUS as is current practice); and
• Allow more time for companies to petition in response to adverse CFIUS determinations and more time for CFIUS to respond to those petitions.

Currently, CFIUS may request, but cannot demand, information on non-notified transactions even when CFIUS should have received notice of those transactions.

CFIUS argues that the rulemaking clarifies some uses of subpoena power already granted to it under The Defense Production Act (DPA).

According to Treasury, increasing penalties is warranted because some transactions may have a notational value of $0 because they may involve assumption of an ownership interest, the creation of a joint venture, constitute an investment, or for other reasons.

Comments are due in 30 days. The rulemaking builds on steps the Biden Administration has already undertaken to strengthen the CFIUS review process (partially in response to criticism from Congress as well as 2018’s Foreign Investment Risk Review Modernization Act (FIRRMA)).

Clients, friends and family only.