U.S. May Clarify Scrutiny Of Foreign Investments
By MAYA JACKSON RANDALL

WASHINGTON -- The Treasury Department said it may review rules for foreign investments in U.S. companies that involve stakes smaller than 10%, depending on the level of control exerted by the foreign entity.

The proposed new rules are aimed at clarifying the authority of the Committee on Foreign Investment in the U.S., which has weathered intense congressional criticism in the wake of business deals proposed by foreign firms, including a failed attempt by Dubai Ports World to acquire commercial operation rights at six U.S. ports.

The issue of foreign investment in U.S. companies is sensitive because a growing number of sovereign-wealth funds have kept their investments in U.S. financial firms under 10% to avoid probes by the committee, known as CFIUS.

Lawmakers wanted the rules to make clear that purchasers don't get a free pass just by keeping their investments below a certain threshold.

CFIUS, which is chaired by the Treasury secretary, reviews foreign investment deals to ensure they won't pose a threat to national security. CFIUS can recommend that the president block a transaction.

To address concerns about national security, Congress last summer passed legislation to overhaul the CFIUS process and tighten scrutiny of foreign investment deals.

The Treasury Department's proposal aims to implement that legislation by increasing the number of transactions that are subject to review and requiring greater disclosure of the committee's decisions, among other things.

"These regulations reflect America's strong and continued commitment to safeguarding U.S. national security in a manner that reinforces the longstanding U.S. policy of welcoming foreign investment," said Treasury Assistant Secretary for International Affairs Clay Lowery. "The proposed regulations increase clarity and make additional improvements based on experience."

Rep. Carolyn Maloney (D., N.Y.), who played a key role in writing the new CFIUS laws, praised the Treasury's regulations for making it clear that foreign investment resulting in less than 10% stock ownership can still face a CFIUS review.

"These regulations are a positive step forward," said Rep. Maloney, who heads the House subcommittee on financial institutions and consumer credit.

Business groups also applauded Treasury's actions.

"The issue of the regulations clarifies the procedures for national security review" by CFIUS and provides certainty to investors, said the Business Roundtable, the Financial Services Forum, the Organization for International Investment and the U.S. Chamber of Commerce in a joint statement.

Instead of acting as a barrier to foreign investment, the rules provide "a road map" for investors by clarifying which transactions would require CFIUS review and what the process will entail, the business groups said.

The Department is holding a 45-day comment period on its proposal and plans to hold a public meeting on the plan on May 2.