Treasury Proposes to Expand CFIUS' Investigative and Penalty Authority

The Treasury Department issued a rule proposal that would allow the Committee on Foreign Investment in the United States ("CFIUS") to (i) obtain more information as part of its review process and (ii) authorize "substantially" larger penalties in instances of noncompliance with relevant regulations.

The proposed rules would expand the instances in which CFIUS can issue subpoenas, to include information requests from third persons not a party to a transaction notified to CFIUS. The proposal would also expand the circumstances in which a civil monetary penalty may be imposed due to a party's material misstatement and omission, including when the material misstatement or omission occurs outside a review or investigation of a transaction and when it occurs in the context of the CFIUS' monitoring and compliance functions.

The proposed rules would also increase the maximum penalty available for violations of obligations under the CFIUS statute and regulations. Under the proposed rule, CFIUS can recommend an increase to the maximum penalty for violations of (i) material provisions of mitigation agreements; (ii) material conditions imposed by the Committee; or (iii) orders issued by the committee. Under the proposal, CFIUS could recommend an increase in the penalty from $250,000 per violation to $5 million or the value of the transaction, whichever is greater.

Additional key changes include:

• expanding the types of information CFIUS can require transaction parties and other persons to submit when engaging with them on transactions that were not filed with CFIUS;
• instituting an extendable timeline for transaction parties to respond to risk mitigation proposals for matters under active review; and
• extending the time frame for submission of a petition for reconsideration of a penalty and the number of days for the CFIUS to respond to such a petition.

The Treasury said that CFIUS will continue to evaluate the facts and circumstances surrounding the conduct including the aggravating and mitigating factors described in the CFIUS Enforcement and Penalty Guidelines.

Comments on the proposal are due 30 days following its publication in the Federal Register.