U.S. Treasury Aims to Strengthen Oversight of Foreign Investments Amid National Security Concerns

In a move to bolster national security, the U.S. Treasury is pushing for increased authority for the Committee on Foreign Investment in the United States (CFIUS) to scrutinize and regulate corporate deals between U.S. companies and foreign investors. The proposed rule aims to expand the committee's powers and enforcement capabilities to address the growing concerns related to foreign investments.

The proposed rulemaking seeks to grant CFIUS expanded subpoena authority, enabling the committee to obtain more information from parties involved in a proposed sale. Additionally, the rule aims to broaden the circumstances under which fines can be imposed, increasing the potential fines from $250,000 to $5 million for cases involving misstatements, omissions, and failure to file mandatory declarations.

The proposed changes come in response to the escalating national security concerns arising from foreign investments, particularly as global competition intensifies and the U.S. prioritizes the development of its domestic supply chains. The heightened scrutiny is exemplified by recent high-profile deals, such as Nippon Steel's bid to acquire Pittsburgh-based U.S. Steel Corp, which has faced opposition from President Joe Biden due to its potential impact on American steel companies and workers.

CFIUS Review of TikTok and Other Transactions

Under the proposed regulations, the ownership of popular social media app TikTok is also under CFIUS review, reflecting the government’s efforts to address national security issues related to sensitive personal data. The heightened focus on foreign investments is further evidenced by the U.S. House of Representatives' passing of a bill that could compel ByteDance, the Chinese firm behind TikTok, to divest its ownership of the app within the U.S.

The proposed rule has drawn attention from legal experts, with some viewing it as a significant step towards enforcing national security policies related to foreign investments. The move is expected to incentivize thorough scrutiny of deals before submission to CFIUS, signaling a more proactive and aggressive enforcement approach by the committee.

Overall, the proposed rule signifies a broader effort by the U.S. government to safeguard national security interests amidst the evolving landscape of global economic interactions and technological advancements.