With final rules expected in early 2020, John Lash, Principal, Control Risks, discusses transitioning from the CFIUS pilot program to full Foreign Investment Risk Review Modernization Act (FIRMMA) implementation with Financiar Worlwide Magazine and a panel of experts. Below is an excerpt of the interview, the full text can be accessed here.
How have investment funds responded to the September 2019 proposals by the Committee on Foreign Investment in the United States (CFIUS) to widen the Foreign Investment Risk Review Modernization Act’s (FIRRMA’s) scope? To what extent do the proposals provide additional clarity and certainty for foreign investors?
Lash: Investment funds have historically demonstrated the ability to navigate major economic shifts and evolutions in global trade policy. Draft regulations provide a framework for evaluating the viability of investment targets and assessing the appropriate structure of the fund vehicle for investments. However, investment fund decisions are too complex for a single predetermined decision tree, which can lead to uncertainty and frustration. The clarity provided to funds is grounded in performing risk-based assessments and having the information to make difficult decisions based on the unique deal. Funds recognise they must be able to address risks surrounding access to and control of information, involvement in substantive decision making and membership rights afforded by the transaction. Some funds elect to exclude certain investor groups from investments, which may raise CFIUS concerns. Others recognise the relative strength of offerings, which provides for reduced execution deal risk.