Implications of New CFIUS Regulations for Fund Investments

Quick takeaways:
  • Under the new FIRRMA regulations taking effect in February 2020, CFIUS has jurisdiction over, and in many cases CFIUS filings will be mandatory for, noncontrolling foreign investments in U.S. businesses involved with critical technology, critical infrastructure, and sensitive personal data of U.S. citizens.  
  • Certain indirect foreign investments made through qualifying U.S.-managed investment funds will be disregarded if the foreign investors have limited governance and information access rights and if limited partner advisory committees or similar bodies in which foreign investors participate also have limited rights.
  • These rules have important implications for U.S.-based investment funds, foreign investors in those funds, and businesses receiving offers of investment from such funds.


Recognizing the importance of investment funds to U.S. investment activity and mergers and acquisitions, and also acknowledging that fund participants may include non-U.S. investors who have no meaningful involvement in the funds’ portfolio businesses, the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA), as part of its reform of the jurisdiction and processes of the Committee on Foreign Investment in the United States (CFIUS), authorized CFIUS to exempt certain indirect foreign investments via U.S.-managed investment funds from some of FIRRMA’s provisions relating to investments in U.S. businesses engaged in developing or producing critical technology, providing critical infrastructure, or collecting sensitive personal data (together, “TID Businesses”).

On January 13, 2020, CFIUS released final regulations implementing the exemptions authorized by FIRRMA. These rules, which take effect on February 13, 2020, will have important implications for the following types of parties:

  • Investment funds raising funding from non-U.S. investors;
  • Established investment funds with non-U.S. investors, whose funds are not fully invested;
  • Non-U.S. investors in U.S. investment funds; and
  • U.S. businesses receiving acquisition or investment offers from funds with non-U.S. investors.

The FIRRMA regulations as a whole, and the regulations applicable to fund investments in TID Businesses in particular, are lengthy, detailed, nuanced, and in the case of a key definition (as described above), not yet final. Given the complexity of the new rules and their implications for investments in and by U.S.-managed funds, parties pursuing such investments are encouraged to seek experienced counsel for assistance. Please e-mail one of the contacts to the right if you have any questions or concerns.