The Committee on Foreign Investment in the United States ("CFIUS") has released its first-ever enforcement and penalty guidelines—putting industry on notice and inviting self-disclosures.
On October 22, 2022, CFIUS published its first set of enforcement and penalty guidelines ("the Guidelines"). While nonbinding, the Guidelines provide valuable insight into CFIUS's expectations and enforcement priorities as it administers its newly expanded authorities.
The Guidelines emphasize CFIUS's enforcement authority over "three categories of acts or omissions":
- "Failure to file" where a filing is mandatory;
- Noncompliance with CFIUS mitigation agreements, conditions, or orders; and
- "Material misstatements in or omissions" from information submitted to CFIUS, including in filings, certifications, and information provided during informal consultations and in response to CFIUS requests.
In addition to the reputational and deal-closing risks posed by a potential CFIUS enforcement action, CFIUS's regulations provide for a civil penalty of up to $250,000 or the value of the transaction per violation, whichever is greater.
Notably, the Guidelines "strongly encourage" parties to self-disclose identified violations in writing to CFIUS, which may be considered as a mitigating factor when evaluating whether to institute a penalty.
According to the Guidelines, factors CFIUS may consider when evaluating whether to impose a penalty include:
- The impact of an enforcement action on protecting national security;
- The actual or threatened harm to U.S. national security caused by the violation;
- Any effort to conceal or delay the sharing of relevant information with CFIUS;
- The party's degree of knowledge and cooperation with CFIUS, including the promptness of any disclosure and remediation efforts;
- The seniority of personnel that knew or should have known about the conduct;
- The frequency, duration, timing of the conduct;
- The compliance history and culture of the party, including the resources it dedicated to ensuring compliance and implementing related trainings, policies, and procedures; and
- The experience of other federal, state, local, or foreign authorities with the party.
Parties with existing CFIUS mitigation agreements, parties considering cross-border deals that may be subject to a filing requirement, and parties engaged in filing a deal or responding to a CFIUS inquiry should be familiar with the Guidelines and consider how CFIUS obligations may apply to them.