CFIUS Issues Draft FIRRMA Regulations and Invites Public Comment

On September 17, 2019, the U.S. Department of the Treasury, as chair of the Committee on Foreign Investment in the United States (CFIUS), issued long-awaited draft regulations implementing elements of the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA), landmark CFIUS reform legislation enacted in August 2018. The two sets of draft regulations address the expansion of CFIUS jurisdiction to include certain noncontrolling investments and a broader range of real estate transactions, as well as mandatory CFIUS filings for transactions involving businesses engaged in critical Technology, critical Infrastructure, or sensitive personal Data of U.S. citizens (collectively referred to by CFIUS as “TID”). CFIUS will accept public comments on the draft regulations until October 17, 2019; after evaluating those comments, CFIUS is expected to issue final rules no later than January 2020, with the new regulations taking effect no later than February 13, 2020.


The draft regulations were issued in two separate proposed rulemakings: one covering controlling and noncontrolling investments in U.S. businesses, and another covering real estate transactions undertaken outside the scope of investments in U.S. businesses.

How the Draft Regulations Address Key Issues in FIRRMA

In our client alert on September 4, 2019, we identified 10 key issues expected to be addressed in the FIRRMA regulations. Most, but not all of these issues were addressed in the draft regulations:

Issues Deferred for Future Rulemaking

The draft regulations issued on September 17 note that CFIUS has deferred further rulemaking on two issues for a later date:

Other Notable Provisions of the Draft Regulations

The two proposed rulemakings are together more than 300 pages long, and include a great many details and nuances that will require analysis of specific facts and circumstances before they can be applied to individual transactions involving U.S. businesses and real estate.  In addition, as noted in the draft regulations, CFIUS expects to update the regulations periodically to reflect changes in technology, business practices, and the national security environment.  We advise prospective parties to monitor the development of these regulations and to consult with experienced counsel before undertaking these transactions.

1: The draft regulations also do not address whether, as suggested by the statutory language of FIRRMA, the safe harbor would be available for a passive indirect investment via a U.S.-managed fund only if the fund actually has an advisory board.  Presumably, Congress and CFIUS should be even more comfortable offering a safe harbor for indirect investments through funds that do not have advisory boards.