ICI Urges Treasury to Refine Outbound Investment Rules

In a comment letter to the Treasury Department, the Investment Company Institute ("ICI") reviewed the first six months of implementation of the Outbound Investment Security Program ("OIS Program") rule. 

The OIS program restricts or requires notification of certain investments by US persons into foreign entities involved in sensitive technologies—specifically semiconductors, quantum information technologies, and artificial intelligence—in countries of concern. The program aims to prevent US capital and expertise from supporting the development of foreign military, intelligence, or surveillance capabilities.

The ICI emphasized the importance of "clear, predictable, and operationally feasible rules" to balance national security with investor access to global markets.

The ICI urged Treasury to:

1. Maintain the Public Securities Exemption. The ICI emphasized that the exception for publicly traded securities is essential to maintaining a "workable and rational framework" under the OIS Program. The ICI asserted that these securities are unlikely to pose national security risks and stated that Treasury already possesses "robust tools" through OFAC, including the CMIC sanctions program, to manage any concerns. The ICI warned that removing the exception would impose a "disproportionate" compliance burden. 
2. Preserve Exceptions for Registered Funds and BDCs. The ICI argued that maintaining the exception for investments in registered investment companies and BDCs is "key to avoiding unduly burdening everyday Americans" with compliance obligations. The ICI stated that these entities are already subject to the OIS program’s requirements, and fund managers are better positioned to fulfill compliance duties. The ICI highlighted that eliminating the exception would impose "unrealistic due diligence requirements" on millions of retail investors and could undermine their ability to achieve long-term financial goals.
3. Revisit Minority Shareholder Rights Treatment. The ICI urged Treasury to reconsider its position on director nomination rights, recommending that the ability to nominate directors be treated as a "standard minority shareholder right." The ICI highlighted that in jurisdictions like China, even shareholders with as little as one percent ownership may nominate directors, making such rights common and not indicative of control. ICI warned that excluding these rights from the exemption framework could limit ordinary portfolio investments and proposed, as an alternative, that such rights should only affect exemption status if actually exercised.
4. Improve Transparency and Compliance Support. The ICI encouraged Treasury to enhance compliance clarity by adopting a "publicly available non-exhaustive list" of Covered Foreign Persons under the OIS Program. The ICI stated that such a list—paired with anonymized notifications and Treasury’s determinations—would help investors apply the rules more consistently and reduce compliance burdens. The ICI also recommended that Treasury publish periodic summary reports, similar to CFIUS annual reports, to provide ongoing guidance to the investment community.
5. Establish a Public-Private Working Group. The ICI recommended that Treasury establish a public-private working group to support the implementation of the OIS Program. The ICI stated that the group could facilitate ongoing information sharing between government and industry, helping to identify trends, clarify operational challenges, and improve compliance. The association stated that regular dialogue would advance national security goals while preserving access to global investment opportunities.