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Outbound investment review looms large for US investors and companies
A new federal program will require notification of — and potentially block — investment in sensitive technology sectors of countries of concern.
The program will introduce risk to US investment firms and companies with business ties to China.
Affected firms will have to notify the government of covered deals and bolster their compliance program to support investment risk monitoring, review and mitigation.
On August 9, the Biden Administration directed the Department of Treasury, Department of Commerce and other federal agencies to enact a new outbound investment review program to monitor and potentially block new investment in sensitive economic sectors of “countries of concern.” Concurrently, Treasury released an Advanced Notice of Proposed Rulemaking (ANPRM) to provide additional information and clarity — as well as solicit feedback — on the program’s scope. The focus on outbound investment review stems from the growing concern over US capital flows that threaten US strategic and defense interests.
These measures can impact the international investment landscape. As it stands, outbound investment screening will introduce risk to a variety of firms, including those in the asset wealth management, private equity and venture capital spaces, and companies with business ties to China. Investments in technology, manufacturing and cybersecurity companies will be particularly affected.
Firms need to align their compliance programs to the new requirements and cross-regulatory expectations.
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