On Nov. 19, the Committee on Foreign Investment in the U.S. (CFIUS) hosted its annual conference, featuring speakers from across the U.S. government who highlighted major CFIUS rulemaking and achievements this past year.

Here are some key takeaways from this week’s conference. 

• Enforcement and compliance. CFIUS flexed its muscles this year on enforcement and compliance, notably, in two ways: 1) by issuing a final rule on Nov. 18 that enhances CFIUS’ enforcement capabilities and 2) by issuing a record number of penalties, including a $60 million penalty – the largest CFIUS penalty to date. Under the new rule, CFIUS has expanded authority to issue subpoenas and has increased the maximum monetary penalties for violations from $250,000 to $5 million.
• More reviews of private fund transactions and scrutiny of limited partners. Though CFIUS consistently clears transactions where a foreign investor is a limited partner (LP), including instances when an LP is foreign government controlled, CFIUS has also taken a more assertive stance in requiring private investment funds to be as transparent as possible on the identities and control/governance rights of LPs, especially those with a greater than 5 percent interest in the fund. CFIUS also has an interest in knowing about LPs with 5 percent or less interest if investors are from countries of concern (such as China).
• Real estate and proximity to sensitive U.S. installations. CFIUS also highlighted its new rule increasing its coverage of foreign investments in real estate located in proximity to certain U.S. military installations. Nearly 60 military installations will be added to an existing list of military installations and approximately 10 existing installations will be extended for CFIUS jurisdiction purposes. CFIUS mentioned during the conference that the renewable energy industry has been a particular area of focus triggering jurisdiction over real estate transactions, due to the critical infrastructure component.
• Economic security as national security. Former CFIUS officials now in the private sector opined during the conference presentations on what changes we might see in the next presidential administration. An area that was mentioned involved the extent to which CFIUS may consider economic security (i.e., American jobs) as part of its national security analysis. As we saw during this election cycle, American economic security could certainly influence the CFIUS outcome in certain high-profile transactions.

Given CFIUS’ increased enforcement, compliance and rulemaking activity, the stakes for conducting thorough CFIUS due diligence in the early stages of a transaction and anticipating the concerns of CFIUS remain as high as ever.