The Committee on Foreign Investment in the United States Issues New Enforcement and Penalty Guidelines.

2024-09-24 22:47:35

On October 20, 2022, the U.S. Department of the Treasury, acting as the chair of the Committee on Foreign Investment in the United States (CFIUS), issued the first-ever CFIUS Enforcement and Penalty Guidelines ("Guidelines"). These Guidelines provide direction on how CFIUS assesses violations of relevant CFIUS laws and regulations by parties involved in transactions under its jurisdiction, and they clearly indicate CFIUS's intention to strengthen the enforcement of mandatory filings and risk mitigation agreements as required by FIRRMA. Specifically, the Guidelines outline the types of conduct that may constitute violations of CFIUS laws and regulations, the procedures CFIUS generally follows when imposing penalties, and a non-exhaustive list of aggravating and mitigating factors that CFIUS may consider.

Types of Conduct That May Constitute Violations of CFIUS Laws and Regulations

The Guidelines list three types of conduct that may constitute violations of CFIUS laws and regulations, including both acts and omissions:

• Failure to timely submit mandatory filings;

• Violation of or failure to comply with CFIUS risk mitigation agreements, conditions, orders, etc.; and

• Material misstatements, omissions, and false or substantially incomplete information in submissions to CFIUS.

According to the Guidelines, not all violations will necessarily result in penalties, and the decision to impose penalties will be at the discretion of CFIUS. The Guidelines also specify how CFIUS may obtain information to investigate potential violations, including but not limited to information provided by the parties themselves (through voluntary self-disclosures or in response to CFIUS inquiries), CFIUS risk mitigation agreement monitors and auditors, whistleblowers, other government agencies, and public information. Notably, the Guidelines formally discuss voluntary self-disclosures to CFIUS for the first time. The Guidelines encourage timely self-disclosure of potential violations of CFIUS laws and regulations and indicate that such self-disclosures may be considered as a factor in CFIUS's decision-making regarding alleged violations.

Penalty Procedures

The Guidelines also explain the process for imposing penalties for violations of CFIUS laws and regulations. In short, CFIUS will send a notice of penalty to the parties involved, including a description of the alleged violation and the proposed penalty amount. The parties may submit a petition for reconsideration to CFIUS within 15 business days. If the petition is timely submitted, CFIUS will issue a final penalty decision within 15 business days of receiving the petition. If the petition is not timely submitted, CFIUS may issue a final penalty decision by notice to the parties.

Aggravating and Mitigating Factors Considered for Penalties

For violations of CFIUS laws and regulations, the Guidelines also provide some aggravating and mitigating factors that CFIUS may consider when deciding to impose penalties, including (non-exhaustively):

• Accountability systems and future compliance;

• The harm to U.S. national security caused by the conduct;

• The party's negligence, knowledge, and intent;

• The duration and timing of the violation;

• The party's response and remedial actions, including whether the party submitted a self-disclosure and cooperated with CFIUS; and

• Compliance maturity and history of compliance.