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Publications 2022

Please scroll down to read the publications, newsletters, client alerts,
and leadership resources shared by our partners, counsels and associates.

Department of Treasury Releases CFIUS Enforcement and Penalty Guidelines



        On October 25, 2022, the U.S. Department of Treasury released the CFIUS Enforcement and Penalty Guidelines (the “Guidelines”). Such Guidelines are a new step in the evolving development of CFIUS review procedures after the expansion of its staff and funding under the Consolidated Appropriations Act in March 2022, as our prior newsletter described.

        The Guidelines clarify four issues: First, The Types of Conduct that may constitute a violation; Second, Sources of Information on which CFIUS Relies; third, Penalty Process; fourth, Aggravating and Mitigating Factors.

        First, the Guidelines point out three potentially unlawful conducts: Failure to File, Non-Compliance with CFIUS Mitigation, and Material Misstatement, Omission, or False Certification. Second, regarding the sources of information on which CFIUS relies, the Guidelines note that the committee considers a wide range of sources but emphasize three sources in particular: Tips, Self-Disclosure, and Requests for Information. Third, the Guidelines address that a violation does not necessarily lead to a penalty but outline two important steps in the penalty process: Notice; Contest and Assessment. Fourth, in determining the appropriate response to a violation, the Guidelines point out that CFIUS considers a series of aggravating and mitigating factors. The Guidelines list six relevant factors: Accountability and Future Compliance; Harm; Negligence, Awareness, and Intent; Persistence and Timing; Response and Remediation; Sophistication and Record of Compliance.

        This is the first time that CFIUS clarifies its otherwise obscure procedures. However, this Guideline is non-binding and CFIUS retains broad discretion with respect to its enforcement and penalty decisions. Indeed, listing those potentially unlawful conducts may forewarn investors. To be sure, investors should be cautious in making their filing/non-filing decisions and be especially careful to ensure the completeness and accuracy of information submitted to CFIUS during the review process.





Department of Defense updated its Section 1260H list



        On October 5, 2022, U.S. Department of Defense releases a new list of People's Republic of China (PRC) Military Companies – as required under Section 1260H of the National Defense Authorization Act for Fiscal Year 2021 (NDAA 2021). The first list was released last year in June, 2021. The Department of Defense is required, under Section 1260H(b)(1) of NDAA 2021, to annually report “Chinese military company” until December 31, 2030.

        Although the text of the statute imposes an obligation to report annually, the Secretary of Defense is of the authority to decide additions or deletions to the list. The definitions provided in Section 1260H are broad and vague. The text of that statute does not exclude the possibility that any private Chinese company be labelled as “Chinese Military Company.” Indeed, Section 1260H(d)(1) to (3) of NDAA defines “Chinese military company” and “Military-civil fusion contributor” (MCFC) loosely. The definition of MCFC contains an all-encompassing definition under which an entity can be a “MCFC” whenever “the Secretary determines … appropriate.”

        However, no trade restriction measures or any other forms of sanctions are stated in the list this time. Indeed, Section 1260H of NDAA only labels these companies as “CMC” without stating what sanctions or limitations to follow -- a scenario that is different from NS-CMIC list produced by the Biden administration and Section 1237 list produced by the Trump administration.


        尽管NDAA 2021法律条文赋予美国防部每年公布名单的义务,但是具体某一企业进入或脱离名单由美国防部决定。并且,2021国防预算法案中所规定的判断一家企业是否属于“中国军方企业”和“军民融合的贡献企业”的定义宽松。不能排除任何一家与军方并无关联的民营企业被美方划入该名单的可能。具体来说,第1260H条d款1项至3项提供了对于“中国军方企业”和“军民融合的贡献企业”的定义。其中,“军民融合的贡献企业”的定义中包含一兜底条款第1260H条d款2项H节:“其他任何由国防部部长决定符合的情形。”


CFIUS Conference 2022 – updates on case review principles


        In June 2022, the Committee of Foreign Investments in the United States (“CFIUS”) hosted their first ever conference for practitioners, many important notices were addressed at the conference.

To adapt to the ever-evolving national security landscape, CFIUS suggested that it would be smart for investors to be prepared for mitigation and expect any future re-negotiation of mitigation measures. To prepare for a CFIUS review, filing a shortened declaration instead of a full Joint Voluntary Notice (“JVN”) can be beneficial at times, however for investors from countries of concern, or when the petition involves other complex issues, a JVN would be expected.

        With respect to data security, cases involving sensitive personal data (“SPD”) should be analyzed not only for its current access to SPD, but also for how these data collecting practices would change in the future. Genetic and Medical data are now concerned as “high risk”. CFIUS stated that they will continue to share investment screening data with allies of the United States, and work with them on collecting intelligence on foreign acquirers.

        The Consolidated Appropriations Act on March 8th, 2022 funded 12 staff positions in the “Industry and Analysis” unit of the Commerce department’s International Trade Administration, The CFIUS review would become more in-depth around the protection of American technology, and investors should expect increasing mitigation orders, and more post-review questions.



        其次,数据安全方面,涉及敏感个人数据("SPD")的案件,审查不仅包括其目前对SPD的访问情况,也需涵盖未来数据收集方式可能发生的变化。其中基因和医疗数据现在被视为 "高风险"。CFIUS表示,他们将继续与众多盟友国分享投资相关数据,并与他们合作收集有关外国投资者的情报。

        最后,2022年3月8日的《综合拨款法案》为商务部国际贸易管理局的 "行业和分析 "部门提供了12个职位,CFIUS的审查将围绕防止技术外泄变得更加深入严谨,投资者预计会面临更多的缓解令,以及审查完结之后来自相关部门的后续跟进。

SEC published Sample Letter to China-Based Companies


        On Dec 20, 2021, Division of Corporation Finance of SEC publish Sample Letter to China-Based Companies. Recent events have highlighted the risks associated with investing in companies that are based in or that have the majority of their operations in the People’s Republic of China (China-based companies). The Division of Corporation Finance believes that more prominent, specific, and tailored disclosure about these risks, and companies’ use of the variable interest entity (VIE) structure specifically, is warranted to provide investors with the information they need to make informed investment decisions and for companies to comply with their disclosure obligations under the federal securities laws.

        In light of these concerns, the Division is issuing comments to China-based companies seeking more specific and prominent disclosure about the legal and operational risks associated with China-based companies. The Division’s comments focus on the need for clear and prominent disclosure regarding the structure of the company, including the relationship between the entity conducting the offering and the entities conducting the operating activities, risks associated with a company’s use of the VIE structure, and the potential impact on the company’s operations and investors’ interests if such structure were disallowed or the contracts were determined to be unenforceable. The Division’s comments also focus on additional legal, regulatory, and enforcement risks that may apply to investments in China-based companies, such as the potential impact of the Holding Foreign Companies Accountable Act and related rules and any necessary PRC permissions a China-based company may need to operate its business or offer securities to foreign investors.

The illustrative sample letter contains sample comments that, depending on the particular facts and circumstances, the Division may issue to China-based companies. The Division urges companies to consider these sample comments and additional regulatory developments in this area as they prepare their disclosure documents.


       鉴于这些担忧,该部门正向中国公司发表意见,要求披露与中国公司有关的法律和经营风险的更具体和突出的信息。该部门的意见集中于明确和突出披露公司结构的必要性,包括进行发行的实体和进行经营活动的实体之间的关系,与公司使用VIE结构相关的风险,如果这种结构被禁止,或合同被确定为不可执行,将对公司的运营和投资者的利益产生潜在影响。该部门的评论还关注了在中国投资公司可能面临的额外法律、监管和执法风险,例如《外国控股公司问责法》(Holding Foreign Companies accountability Act)和相关规定的潜在影响,以及中国公司在经营其业务或向外国投资者提供证券时可能需要获得的任何必要的中国许可。


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