|
Washington, DC - House Financial Services Committee Chairman Barney Frank, Financial Institutions and Consumer Credit Subcommittee Chairwoman Carolyn Maloney, and Domestic and International Monetary Policy, Trade and Technology Subcommittee Chairman Luis V. Gutierrez, sent a letter today to Department of Treasury Secretary Henry Paulson, regarding the development of regulations for the implementation of the Foreign Investment and National Security Act (FINSA) when they are reviewed by CFIUS.
The full text of the letter as follows:
Dear Secretary Paulson,
The rapid growth in investments in the United States coming from foreign government investment vehicles -- whether sovereign wealth funds, state-owned companies, or state pension funds -- highlights the importance of provisions the Financial Services Committee wrote in the Foreign Investment and National Security Act (FINSA), which require heightened scrutiny for these transactions when they are reviewed by CFIUS. As you develop the implementing regulations for FINSA, we want to emphasize two areas where we believe the regulations can be particularly useful in addressing these issues.
First, we do not believe the current regulations are sufficiently clear in describing the role that the 10 percent threshold plays as a test for control for CFIUS’s purposes. We urge you to clarify in the new regulations that this threshold is only one of the indicia of control and does not represent a bright line below which CFIUS has no ability or intent to review a transaction. FINSA does not specify a percentage threshold, and while we recognize the need to offer guidance to companies so that they can plan accordingly, the regulations should not give the false impression that investments below this threshold are also below the radar in terms of the CFIUS’s ability to do its work.
Second, FINSA creates a presumption that all foreign government transactions before CFIUS will be subject to both a review and an investigation. This requirement recognizes the unique risks associated with foreign government ownership generally. As a general matter, this presumption clearly encompasses sovereign wealth funds. At the same time, FINSA recognizes that not all of these investments raise concerns serious enough to warrant a full investigation. For example, investments from a pension fund owned by a democratic government with a long track record of investment in the United States, such as Canada or Norway, are not likely to raise the same degree of concern as some others. As a result, FINSA creates a “waiver” authority, to be exercised by the CFIUS chairman and the lead agency, allowing the transaction to proceed without a full investigation when no national security threats are identified by the 30 day review.
Given the diverse array of foreign government investments and investors identified by the recent focus on sovereign wealth funds, from very transparent and commercially-focused funds to funds about which little is known, we believe the FINSA regulations could usefully provide guidance on factors that CFIUS will consider in determining whether or not to grant a waiver. Positive factors that emphasize a commercial investment mandate, and the policies and procedures that would ensure such a mandate, would serve to clarify how CFIUS will treat sovereign wealth funds and would also, in our view, provide some constructive pressure on many funds that do not currently follow best practices.
BARNEY FRANK CAROLYN B. MALONEY LUIS V. GUTIERREZ
|
|
