On April 11, 2024, the US Department of the Treasury issued, for notice and comment, proposed modifications (Proposed Rule) to certain Committee on Foreign Investment in the United States (CFIUS or Committee) regulations. In recent months, the US government has taken a number of actions to further enhance the enforcement of US national security objectives. The Proposed Rule is another example of the US government prioritizing and refining its national security authorities.

Treasury’s CFIUS regulations implement section 721 of the Defense Production Act of 1950, as amended, which authorizes CFIUS to review the national security implications of (1) transactions by or with foreign persons that could result in foreign control of any US business, (2) certain non-controlling investments by foreign persons in US businesses, and (3) certain real estate transactions involving foreign persons.

Most notably, the Proposed Rule increases the penalties for violations of various CFIUS rules, including the filing of false statements in CFIUS notices or declarations and material violations of mitigation agreements imposed by CFIUS.¹ Specifically, in an apparent effort to deter such violations, the Proposed Rule increases the maximum penalty, where applicable, from $250,000 per violation (or the greater of the value of the transaction for certain violations) to $5 million per violation (or the greater of the value of the transaction for certain violations). A table summarizing the changes in penalties is set forth in Exhibit A below.

In the context of an already robust CFIUS regime, the Proposed Rule also expands and enhances CFIUS procedures and enforcement capabilities in a number of ways:

• Broadening the scope of information the Committee is permitted to require from parties when reviewing non-notified transactions;
• Expanding the Committee’s subpoena authority to include obtaining information from third parties (those not party to a transaction) for both notified and non-notified transactions;
• Establishing extendable timelines for parties to respond to risk mitigation proposals during CFIUS reviews to assist with completing reviews or investigations within the statutory timeframe; and
• Extending the deadlines that parties may submit petitions for reconsideration of penalties and extending the Committee’s time to respond.

In addition to expanding penalty levels, the Proposed Rule expands the types of behaviors subject to monetary penalties. In particular, the Proposed Rule authorizes penalties for material misstatements and omissions in response to the Committee’s requests for information related to non-notified transactions, among other circumstances.

Importantly, Treasury emphasizes that while the Proposed Rule’s revisions would adjust the maximum penalty that may be imposed for certain violations, the Proposed Rule does not impact CFIUS discretion to assess penalties on a case-by-case basis.

In sum, while the Proposed Rule does not represent a major shift in CFIUS’ authority, if the Proposed Rule becomes effective, those in violation of the Committee’s regulations will be exposed to penalties of up to 20 times the current penalties, significantly increasing the regulatory exposure on a per violation basis. Thus, participants in CFIUS proceedings should take care to thoroughly review representations made to the Committee to ensure their accuracy and take notice of the potential for enhanced penalties.

Treasury is accepting comments on the Proposed Rule from the public and interested parties until May 15, 2024.

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1 The amended penalties under sections 800.901(a)-(b) and 802.901(a) would apply to violations that occur on or after the effective date of the final rule, while amended penalties under section 800.901(c) and 802.901(b) would apply to mitigation agreements entered into, conditions imposed, and orders issued on or after the effective date of the final rule.

Exhibit A

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