In September 2023, Paul Rosen, Assistant Secretary of the Treasury for Investment Security, indicated that the Committee on Foreign Investment in the United States (CFIUS) would be expected to issue one or more sets of new regulations in the coming year aimed at increasing efficiency and effectiveness, updating penalties and enforcement authorities, and giving CFIUS greater ability to pursue “non-notified” transactions (transactions for which a filing was not submitted to CFIUS).  

On April 11, 2024, CFIUS shared the first tranche of proposed regulations in the form of a Notice of Proposed Rulemaking (NPRM).  Draft rules in the NPRM address the following issues:

  • Evaluation of non-notified transactions.  Today, if CFIUS's Office of Monitoring and Enforcement (OME) learns of a non-notified transaction, OME can ask the parties for information permitting an assessment of whether CFIUS has jurisdiction over the transaction. The NPRM would expand OME's authority to ask questions going not only to potential jurisdiction, but potential national security risks associated with the transaction, helping inform CFIUS as to whether the transaction could present substantive issues meriting formal review.  OME can also request relevant information from non-parties to the transaction.
  • Limited time to respond to mitigation terms.  If CFIUS determines that a transaction presents a risk to US national security, it will generally try to place conditions on the transaction mitigating these risks, with the conditions usually memorialized in a national security agreement (NSA) negotiated with the parties.  Because of concerns that negotiations of NSA were frequently being dragged out, the NPRM places a standard deadline of three business days for parties to respond to NSA proposals from CFIUS.  This is the same deadline placed on responses to CFIUS questions during its review or investigation of a long-form CFIUS notice, and like that deadline, the parties may request extensions that CFIUS may grant in its discretion.  If the parties fail to provide a substantive response to CFIUS's NSA proposal by the deadline, CFIUS can reject the notice, which could be an issue if CFIUS clearance is a condition precedent for closing.  Even if it is not, CFIUS would still reserve its existing right to impose mitigation conditions on an interim or permanent basis by administrative order.
  • Other information requests.  The NPRM would expand CFIUS's explicit information rights.  CFIUS (presumably OPM) would be able to compel parties to provide information confirming concerning compliance or non-compliance with mitigation conditions.  Also, if CFIUS questions whether any person's submission to CFIUS included a material misstatement or omission, the person would be required to respond to CFIUS questions. CFIUS's ability to collect this and other information would be enhanced by subpoena power that would not apply only when “necessary,” as in the current regulations, but when deemed “appropriate.” 
  • Increased monetary penalties.  Currently, CFIUS can assess civil monetary penalties of (i) up to $250,000 for each material misstatement or omission made to CFIUS, (ii) up to the greater of $250,000 or the value of the transaction for material violations of mitigation conditions, or (iii) up to the greater of $250,000 or the value of the transaction for failure to submit a mandatory pre-closing CFIUS filing.  Under the NPRM, the $250,000 cap for each of these would increase to $5 million.  In addition, the penalties for material misstatements or omissions would also apply to information provided not just in the course of a filing, but during OME's evaluations of non-notified transactions and compliance with mitigation conditions.  Finally, CFIUS has extended the deadlines for parties to appeal penalties and for CFIUS to consider appeals to 20 business days each (increased from 15 business days). 

Looking ahead

Once the NPRM has been published in the Federal Register (probably on or about April 15), the public will be able to submit comments at or by mail to CFIUS as instructed in the NPRM.