In a Law360 article published on August 7, Bass, Berry & Sims attorney Thad McBride provided insight on how the Foreign Risk Review Modernization Act (FIRRMA) legislation included in this year’s National Defense Authorization Act (NDAA) would alter the Committee on Foreign Investment in the United States (CFIUS) by broadening its authority when reviewing foreign investments in the U.S. 

As part of FIRRMA’s effort to broaden CFIUS’s power, the interagency committee will officially have the ability to review foreign investments in U.S. companies that hold personal information of U.S. citizens. While this has been an issue for potential foreign investors in the past (i.e. MoneyGram International Inc.), its formal inclusion in the legislation text takes it to another level. 

“Any acquisition where the party being acquired has access to lots of U.S. individuals’ personal information could be looked at with a lot more scrutiny,” explained Thad. “That opens up a whole panoply of transactions that weren’t previously open to CFIUS reviews.” According to Thad, this could include transactions involving U.S. financial institutions or healthcare companies. 

FIRRMA also prolongs the review process timeline, though this will not be much of a change as more transactions recently undergoing CFIUS approval have been taking longer. “Sensitive transactions and even transactions that aren’t that sensitive have been taking longer to be reviewed anyway. So the timing issues may not, at the end of the day, be that different post-FIRRMA than they have been,” Thad said.

While FIRRMA gives a broad overhaul to CFIUS, certain provisions and other details of the framework will be left up to the Treasury Department to fine-tune. “It’s unclear exactly when the Treasury will weigh in on those provisions, but considering the process, which includes a proposal and a comment period, early 2019 is, for the time being, a fair estimate,” Thad noted.

Foreign buyers might refrain from moving forward until more transactions undergo the new regime. “There could be sort of a cooling-off period in foreign investment in the U.S. while the process plays itself out and while the new regulations are observed in practice,” Thad explained.

The full article, “5 Ways CFIUS Will Change With New Law,” was published by Law360 on August 7, 2018, and is available online.