Proposed Regulations 2008
|
 Proposed
regulations were issued on April 23
Statutory
authorization
Public
hearings
Commentary
October
2007 hearings
- Department
of the Treasury issued a notice of inquiry, requesting public comments on
several issues related to the proposed regulations that are to be issued to
implement the Foreign Investment and National Security Act of 1997 (FINSA)
-
Notice of public meeting 10.11.07
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Treasury Proposal Release
|
Release
Hyperlinked Index to Release
May
2008 Public Meeting I.
Background
of the Statute Discussion
of Proposed Regulations III.
Text
of Proposed Rules
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Comment Letters - US Congress
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Senator
Jim Webb
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Comment Letters - Chinese Entities
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CCCMC
- China Chamber of Commerce of Metals, Minerals &
Chemicals Importers & Exporters
- CCCMC website
- Comment letter
- Raises concern with retroactive application of
rules
~ Points 1 and 4 See 800.103,
800.210
and 800.224
- Suggests that the definition of "control"
and "foreign-government controlled transaction"
is overbroad
~ Points 2 and 3
- Raises concern that post-acquisition plans,
including to eliminate domestic supply, are overreaching
~ Point 5 See
800.402(c((6)
- Suggest that a majority vote of CFIUS members be
required to instigate a 45-day review
~ Point 6 See 800.503(a)(1)
- Raises concern with subjectivity of the terms
"credible evidence" and "threatens to impair national security"
~ Point 7 See 800.501(a)(2)
and 800.503(a)(1)
CMC
- China Ministry of Commerce
- Proposed rules "are excessively stringent, with a great majority of mergers and acquisitions subject to security reviews ... will seriously undermine the confidence of foreign investors to invest in the U.S."
- Heightened focus on "foreign government-controlled transactions"
is discriminatory against foreign companies with state ownership
- Definitions of "national security",
"control" and "critical infrastructure" are ambiguous
- Also raises particular concerns with
jurisdictional definitions and CFIUS procedur
CGCC
- China General Chamber of Commerce - USA
-
CGCC - USA website
- Comment letter
- Raises concern over "broadness and vagueness" of
jurisdictional definitions
- Raises concern over retroactive effect
- Asks for clearer distinction between "influence"
and "control"
- Asks for shorter timelines to avoid deal delay
- Raises concern over the burden imposed on
foreign investors
- Raises particular concern with proposed required
two-day turnaround for additional information
- Raises concern over the exercise of lender's
rights triggering review
- Raises concern over minority shareholder rights
- Raises concern that a decision to investigate is
too arbitrary
- Points out that European Union and China may
tighten their rules in response
CSRC
- China Securities Regulatory Commission
SAC - Securities Association of China
-
CSRC
website
- SAC website
-
Comment letter
- Raises concern that in proposed rules "still
include some sections and procedures which reflect the enshrouded protectionism,
an obvious contradiction to the spirit of free competition the U.S. has
championed since long time ago ... ., revealing self-evident hostility to
"foreign government-controlled" transactions."
- General concern that jurisdictional definitions
are vague
- Raises particular concern that less than 10%
investments are covered
- Raises concern with breadth of English
translation requirements
- Asks that filers have remedies for violation of
confidentiality provisions
CIC
- China Investment Corporation
- CIC is a $200B Chinese sovereign wealth fund,
with minority stakes in The Blackstone Group, Morgan Stanley, AIG International
and VISA, in each case a less than 10% position
-
Comment letter
- Asks for clearer guidance on process for filing
draft notices
- Raises concern with proposed required two-day
turnaround for additional information
- Suggest that list of minority shareholder rights
excluded from the definition of "control" is too narrow
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Comment Letters - Other
Foreign Entities
SEC_CODE_REF_0090001192884
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ABI
- Association of British Insurers
-
ABI website
-
Comment letter
- "Although the formal limitation of the scope of regulations to national security matters is evident there exists a clear perception that in practice other considerations will be permitted to have a bearing on constraints and prohibitions that would be imposed under these regulations ... The signal that this sends, that the USA is not genuinely open to inward investment generated within a free market environment, is potentially damaging in point of principle.
"
- Notes concern with limitations on 10% safe
harbor
CPPIB
- Canada Pension Plan Investment Board
-
CPPIB website
-
Comment letter
- Raises concern with the definition of "critical
infrastructure"
- Suggests that requirements for information
delivery are overbroad
RGIT
- Representative of German Industry + Trade
-
RGIT website
-
CFIUS
factsheet
-
Comment letter
- Raises particular concern with certification
procedures
- Raises concern with the definition of "control"
- Suggest an initial procedure for addressing
threshold control determinations
Norway
Ministry of Finance
- Invokes OECD principles against barriers to
investment
- Raises particular concern that less than 10%
investments could be covered
- Raises concern with Congressional interference
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Comment Letters - US Organizations
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Business
association coalition
-
Comment letter
- Suggest changes to the definition of "control"
- Suggest changes to the definition of
"convertible voting instrument"
- Seeks clarifications on CFIUS timeframes and
process
- Questions need for some of the proposed required
disclosures
ECAT
- Emergency Committee for American Trade
-
ECAT website
- 2007 comment letter
-
2008 comment letter
- Raises concern over the definition of control,
especially because of the potential finding of control in situations with less
than major ownership
- Suggest that list of minority shareholder rights
excluded from the definition of "control" is too narrow
- Raises concern over the exercise of lender's
rights
- Request a process for a pre-filing determination
of control-related issues
- Seeks a clarification that making a filing
doesn't prejudge control
- Seeks clarification for parent company
transactions
- Seeks a safe harbor for later increases in
ownership
- Raises concern with proposed required two-day
turnaround for additional information
- Raises concern that mitigation agreements not be
over-used
- Asks that any retroactive application of the
proposed rules be clarified
IIB
- Institute of International Bankers
- Suggest changes to the definition of "control"
- Raises concern over the exercise of lender's
rights
- Suggest that list of minority shareholder rights
excluded from the definition of "control" is too narrow
- Suggests that financial institutions be clearly
excluded as already covered by federal bank regulatory authorities
- Suggests changes to the definition of
"convertible voting instrument"
- Seeks a pre-notification early determination
process
- Questions need for some of the proposed required
disclosures
OMSA
- Offshore Marine Service Association
- Requests that rules on foreign control of
vessels in American waters be vigorously enforced
NAF
- New America Foundation
- "because of the limitations of the scope and
intent of the relevant legislation that we express our concern that some of the
proposed regulatory language may result in a deterrent, if not an outright
barrier, to legitimate foreign investment"
- "there is likely to be a good deal of
uncertainty as to whether any individual transaction might, inter alia., fall
within the definition of a "covered transaction" (Section 800.206) or whether it
is structured to afford the investor
the necessary level of "control" (Section 800.203) to warrant review by CFIUS"
- "Any unnecessary deterrent to foreign investment
is neither appropriate under Exon-Florio, nor would it
increase our national security. On the contrary, it could endanger our economic
security, instead."
NAM
- National Association of Manufacturers
- Proposed rules "strike an appropriate balance
between the security and investment policy priorities"
- Jurisdictional definitions "have, in general,
been quite well crafted, consistent with the intent of the legislation."
- Requests clarification on confidentiality
protections
- Raises particular issues with use of Export
Control Classification Numbers and listing items under the International Traffic
in Arms Regulations
SEIU
- Service Employees International Union
- Raises concern with ties between private equity
firms and foreign sovereign wealth funds
- Raises particular concern with the definition of
"solely for the purpose of investment"
- Raises concern with post-clearance monitoring of
foreign person's intent
- Asks that more examples be provided about
private equity firms and their foreign investors
- Believes that the role of the Secretary of Labor
is too narrow
- Disagrees with arguments that proposed rules are
unduly burdensome or discriminatory
- Asks that sovereign wealth funds be carefully
scrutinized
SIFMA
- Securities Industry and Financial Markets Association
-
SIFMA website
- Comment letter
- Request a process for a pre-filing determination
of control-related issues
- Suggest that list of minority shareholder rights
excluded from the definition of "control" is too narrow
- Raises concern over the exercise of lender's
rights
- Believes that proposed personal identification
information is burdensome
- Raises concern with proposed required two-day
turnaround for additional information
USCIB
- United States Council for International Business
-
USCIB website
- Comment letter
- Suggest changes to the definitions of "control"
and "influence"
- Seeks clarification for parent company
transactions
- Seeks a pre-notification early determination
process
- Questions need for some of the proposed required
disclosures
- Suggests certain changes to CFIUS process
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Related Topics
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