Several members of the U.S. House of Representatives sent a letter to Department of Treasury Secretary Henry Paulson on March 13, 2008, requesting the Department of Treasury provide clear regulations outlining the application of the Foreign Investment and National Security Act (“FINSA”) on foreign investment in domestically owned companies.  The Department of Treasury is currently tasked with drafting regulations for FINSA.  For background on FINSA, which codified and amended the Exon-Florio review process conducted by the Committee on Foreign Investment in the United States (“CFIUS”), see our earlier post here.

The Representatives expressed concern that, if not carefully drafted, a 10 percent foreign investment threshold (i.e. that at least 10 percent of the total funds of a transaction comes from a foreign source) could be viewed as the sole indicator for CFIUS review.  Rather, they want to ensure that the forthcoming regulations will not prohibit CFIUS from reviewing transactions that fall below the 10 percent threshold, but meet other factors warranting review.  They also want to ensure foreign investors are aware that CFIUS may review transactions that fall below the 10 percent threshold.

Additionally, the Representatives requested that the Department of Treasury draft regulations that provide guidance for when CFIUS should grant a waiver from full investigation of a foreign government transaction.  FINSA presumes that every foreign government transaction must be reviewed and fully investigated, unless the CFIUS Chairman and lead agency grant a waiver because no national security threats are found during the initial review.  The Representatives urge that regulations governing the waiver process are necessary to provide guidance to foreign investors, especially those involved with sovereign wealth fund transactions that are not transparent, as to when CFIUS is likely to conduct a full investigation.