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Interim Rule by Treasury to Establish Pilot Program as to Critical Technologies


Jiyan Yan 颜吉延

November 1, 2018


1. Background

On October 10, 2018, an interim rule published by the Office of Investment Security, Department of the Treasury sets forth the scope of, and procedures for, a pilot program of the Committee on Foreign Investment in the United States (“CFIUS”) under section 721 of the Defense Production Act of 1950, as amended by the Foreign Investment Risk Review Modernization Act of 2018 (“FIRRMA”). This pilot program relating to critical technologies implements provisions of FIRRMA that were not immediately effective upon enactment.  The purpose of the pilot program is to assess and address ongoing risks to the national security of the U.S. resulting from two urgent and compelling circumstances: (1) the ability and willingness of some foreign parties to obtain equity interests in U.S. businesses in order to affect certain decisions regarding, or to obtain certain information relating to, critical technologies; and (2) the rapid pace of technological change in certain U.S. industries.

2. Relevant Definitions

Certain terms as used in FIRRMA are further clarified by the interim rule.

“Contingent equity interest” means a financial instrument that currently does not entitle its owner to voting rights but is convertible into an equity interest with voting rights.

“Critical technologies” is specifically defined with reference to (1) defense articles or defense services included on the United States Munitions List set forth in the International Traffic in Arms Regulations (ITAR); (2) items included on the Commerce Control List set forth in Supplement No. 1 to part 774 of the Export Administration Regulations and controlled: (a) pursuant to multilateral regimes, including for reasons relating to national security, chemical and biological weapons proliferation, nuclear nonproliferation, or missile technology; or (b) for reasons relating to regional stability or surreptitious listening; (3) specially designed and prepared nuclear equipment, parts and components, materials, software, and technology covered by 10 CFR part 810 (relating to assistance to foreign atomic energy activities); (4) nuclear facilities, equipment, and material covered by 10 CFR part 110 (relating to export and import of nuclear equipment and material); (5) select agents and toxins covered by 7 CFR part 331, 9 CFR part 121, or 42 CFR part 73; (6) emerging and foundational technologies controlled pursuant to Section 1758 of the Export Control Reform Act of 2018.

Pilot program U.S. business includes any U.S. business that produces, designs, tests, manufactures, fabricates, or develops a critical technology that is either utilized in connection with the U.S. business’s activity in the pilot program industries, or designed by the U.S. business specifically for use in the pilot program industries. The list of pilot program industries is included in Annex A of this rule. It includes only those industries in which the threat of erosion of technological superiority from some foreign direct investment requires immediate action. These mainly include the aircraft engine and engine parts, computer, telecommunications, nanotechnology and semiconductor industries.

3. Scope of Transactions

The interim rule implements a pilot program relating to foreign investment into certain U.S. businesses that produce, design, test, manufacture, fabricate, or develop one or more critical technologies. Specifically, pilot program covered investment means an investment by a foreign person in an unaffiliated pilot program U.S. business that could not result in foreign control and that affords the foreign person: (1) access to any material nonpublic technical information in the possession of the pilot program U.S. business; (2) membership or observer rights on the board of directors of the pilot program U.S. business or the right to nominate an individual to a position on the board of directors of the pilot program U.S. business; or (3) any involvement, other than through voting of shares, in substantive decision making of the pilot program U.S. business regarding the use, development, acquisition, or release of critical technology. Furthermore, the above situation still applies to pilot program covered transactions irrespective of the percentage of voting interest acquired and the fact that the critical technology produced, designed, tested, manufactured, fabricated, or developed by the pilot program U.S. business became controlled pursuant to section 1758 of the Export Control Reform Act of 2018 after the pilot program effective date, unless any of the criteria set forth in paragraphs (b)(2)(i) through (b)(2)(iii) of § 801.103 (i.e., the parties have executed a binding written agreement establishing the material terms of the transaction before October 11, 2018) is satisfied with respect to the transaction prior to the critical technology becoming controlled pursuant to section 1758 of the Export Control Reform Act of 2018.

Where CFIUS has concluded all action for a pilot program covered investment, any incremental investment that meets the requirements of section 801.209, even if it involves the same foreign person in the same pilot program U.S. business, will nevertheless be considered a pilot program “covered investment” and subject to this pilot program.

On the other hand, the pilot program clarifies the transactions that are not pilot program “covered transactions.” These include (1) an investment by a foreign person in a U.S. business that manufactures a technology that it utilizes in connection with its activity in the pilot program industries, but does not produce, design, test, manufacture, fabricate, or develop critical technologies; (2) an investment by a foreign person in a pilot program U.S. business that does not afford the foreign person any of the rights specified in Section 801.209 (i.e., have access to material nonpublic technical information) or any control rights; (3) a transaction that results in or could result in control by a foreign person of a U.S. business that is not a pilot program U.S. business.

4. Mandatory Declarations


a. Overview

This pilot program establishes mandatory declarations for certain transactions involving investments by foreign persons in certain U.S. businesses that produce, design, test, manufacture, fabricate, or develop one or more critical technologies. It also requires the submission of declarations with basic information regarding certain covered transactions, unless the parties elect to file a notice instead. The distinction between declarations and notices lie in three primary respects: (1) the length of the submission; (2) the time for CFIUS’s consideration of the submission; and (3) the CFIUS’s options for disposition of the submission. Finally, the pilot program provides that CFIUS take one of four actions with respect to a declaration: (1) request that the parties file a notice; (2) inform the parties that CFIUS cannot complete action on the basis of the declaration, and that they may file a notice to seek written notification from CFIUS that CFIUS has completed all action with respect to the transaction; (3) initiate a unilateral review of the transaction through an agency notice; or (4) notify the parties that CFIUS has completed all action.

The information that the parties shall provide in submitting a declaration is listed in Section 801.403 of this interim rule, and includes descriptions of parties, U.S. business and the transaction.

b. Important Date and Time of Review

Parties shall submit to CFIUS a declaration or a written notice no later than: (1) November 10, 2018, or promptly thereafter, if the completion date of the transaction is between November 10, 2018 and December 25, 2018; or (2) 45 days before the completion date of the transaction, if the completion date of the transaction is after December 25, 2018.

Parties should note that CFIUS shall take action on a declaration within 30 days of the receipt of the declaration from the Staff Chairperson, which is distinct from CFIUS’s completing review of a notice within 45 days of receipt.

5. Application

The regulations do not apply to transactions for which the completion date is prior to the pilot program effective date (November 10, 2018), or transactions for which the parties have executed a binding written agreement or other document establishing the material terms of the transaction, for which a party has made a public offer to shareholders to buy shares of a pilot program U.S. business or a shareholder has solicited proxies in connection with an election of the board of directors of a pilot program U.S. business or has requested the conversion of convertible voting securities prior to October 11, 2018.

The pilot program implemented through these regulations will end no later than the date on which the full regulations implementing FIRRMA become effective, and in no event later than the date that is 570 days after the enactment of FIRRMA (i.e., March 5, 2020).

1. 颁布背景


2. 相关定义





3. 交易范围




4. 强制申报


a. 摘要


b. 重要日期和审查时间





5. 规则适用




First US Lawsuit in which Chinese Companies Are Sued for Failure to Obtain CFIUS’s Approval



Jiyan Yan & Xueling Zhou 颜吉延 & 周雪玲

October 9, 2018


Case summary: On March 31, 2017, Ness Technologies S.A.R.L. (“Ness”), a U.S. software engineering company, entered into a Stock Purchase Agreement (the “SPA”) to sell its subsidiary, Jersey Holding Corporation, to Pactera Technology International Limited (“Pactera”), a subsidiary of a Chinese company (the “Parent”), for $325 million, with the Parent acting as the guarantor for the transaction. However, the transaction was blocked because approval of the Committee on Foreign Investment in the United States (“CFIUS”) had not been obtained by the closing date of October 27, 2017. Ness then terminated the SPA and sued the Parent and Pactera in New York’s Supreme Court, claiming that they failed to use reasonable best efforts to obtain CFIUS approval, breached their duty of good faith and fair dealing, and committed fraud. Ness also seeks declarative relief and damages of no less than $65 million. On February 20, 2018, the Parent and Pactera both filed a motion to dismiss all claims. On May 21, 2018, the court dismissed all claims against the Parent but denied motion as to breach of contract and declaratory relief against Pactera. The parties have now proceeded to discovery.

This Newsletter aims to draw a lesson from the transaction and offer the following advice to Chinese companies on deal negotiation, contract drafting and obligation shielding in overseas M&A transactions.

  1. One of the key issues in the lawsuit is whether specific performance under § 10.02(b)(ii) of the SPA constitutes a “condition precedent” to monetary damage. Ness claimed that a condition precedent clause shall be clear and accurate, including specific words such as “if,” “on the condition that,”“in the event that,” and “provided that.” However, the use of the above words in § 10.02(b)(ii) do not appear to apply to specific performance. Ness further argued that both parties, being sophisticated dealmakers, used the above words in other sections of the SPA to phrase conditional clauses, so it was clear that they knew how to draft a condition precedent to the monetary damage. By this logic, both parties did not intend to make specific performance a condition precedent to monetary damage. The court appeared inclined to accept Ness’s interpretation and allowed its breach of contract claim to proceed. We suggest that a clause, if intended by both parties to be conditional, should be expressed clearly and accurately by using the above-mentioned words given courts’ interpretations of contracts based upon the plain meaning of the words used.

  2. Under the since-terminated SPA, CFIUS approval was a closing condition, with both parties are entitled to terminate the SPA and seek applicable relief if the transaction was not approved. Usually, parties may agree upon a “reverse break-up fee” to compensate for the loss of the seller. However, the SPA did not contain such a provision, and instead provided that the seller was entitled to the relief only if the purchaser “willfully and materially” breached the SPA. In light of this, we suggest that Chinese companies agree upon the amount of reverse break-up fee as the sole and exclusive relief that the seller can seek and, if possible, push harder to decrease and minimalize this amount or, as Pactera did in the SPA, propose that the seller is entitled to relief only if the purchaser willfully and materially breaches agreement and limit the amount of such monetary relief. It would also be prudent for Chinese companies to incorporate all matters related to CFIUS (including CFIUS disapproval) into a force majeure or disclaimer clause, and further provide that the purchaser is not responsible for loss caused by a force majeure event or is only responsible under certain circumstances (such as fraud) and, if applicable, that the seller has no right to demand compensation from the guarantor.

  3. Another key issue is whether the Parent is a party of the SPA and therefore should assume liabilities under the SPA. The Parent claims that the definition of parties in the SPA includes only Pactera, Ness and Jersey Holding Corporation and only parties to the SPA, not their non-party affiliates, shall assume liabilities under the SPA. In addition, under the guarantee agreement, Ness agrees that it shall not pursue the Parent for disputes (except in limited circumstances involving Pactera’s willful and material breach) relating to the SPA. The court sided with the Parent and dismissed it from the lawsuit. Normally, in similar transactions, the seller will require the purchaser’s parent or owner to issue a guarantee and an equity commitment letter to ensure sufficient financing and to compensate for potential loss. The purchaser’s parent uses its subsidiary to do the deal in order to prevent unlimited liability. By limiting the parties to the purchaser only, the parent is able to shield obligations under the agreement. We suggest that the purchaser make it clear in the merger agreement that the seller shall not require purchaser’s affiliates to assume any liabilities under the agreement and that the purchaser’s parent further require that the seller shall pursue it only under the guarantee agreement, not the agreement. In this way, the liabilities to be assumed by the purchaser’s parent may be minimalized.

  4. The scope and degree of the guarantee made by the purchaser’s parent also deserves careful consideration. Under the guarantee agreement between the Parent and Ness, in circumstances involving Pactera’s willful and material breach, Ness is not required to proceed against Pactera first before proceeding against the Parent and may bring a separate action against the Parent regardless of whether an action is brought against Pactera. In addition, the scope of the guarantee extends to all reasonable and documented expenses (including attorney’s fees). So we recommend that the purchaser may require that the seller use best efforts and exhaust every means to pursue the seller first and then collect the remaining payment from the guarantor. All expenses (including attorney’s fees) shall be borne by the purchaser.

  5. According to Ness, Pactera’s failure to obtain CFIUS approval was due to Pactera’s multiple amendments of its notices to CFIUS such that CFIUS had serious doubts regarding the ownership structure of the Parent. To mitigate such risks, we recommend that Chinese companies try to finalize their corporate structure in advance and then ensure the completeness and accuracy of the information disclosed to CFIUS, in order to avoid any doubt on the part of CFIUS; otherwise CFIUS may require the disclosure of additional information or delay or block the deal based upon national security concerns.


We recommend that Chinese companies that are parties in overseas M&A deals pay careful attention to these five points. The lawsuit is still pending, and we will monitor it and follow up with further analyses as the case progresses.


本文根据 该案件进展以及整个交易,就中资企业在交易谈判,协议起草以及责任规避提出以下建议。

  1. 本案双方的争论焦点之一在于SPA第10.02(b)(ii)条中寻求特定履行是否属于赔偿金的 “前提条件”。内斯强调,根据纽约州法律,设置“前提条件”条款的要求是前提条件清楚无误,需包含了特定的词汇,如“如果”“ 在……条件下”“ 在……情况下”“ 条件是”。然而,该条中上述词汇的使用并不涉及特定履行,由于交易双方都是经验丰富的当事人且在合同其他条件性条款中确实使用了上述词汇,故应当清楚如何设置条件性条款。因此,双方无意将特定履行设置为寻求赔偿金的前提条件,此处不应被视为条件性条款。最后法院保留了违约的诉讼请求,从中可以看出其倾向于内斯的解释。我们建议,就并购协议而言,倘若双方确认将某项条款设计为前提条件,该条款应当通过上述条件性词汇明确清楚地表示出来,以确保未来一旦出现纠纷需要进行合同解释的时候,法院能够依据合同的字面意思即可清楚地判定是否为前提条件,从而降低了不确定性风险。

  2. SPA中将CFIUS的审批列为交割的前提条件之一,如未获CFIUS审批,则双方有权解除合同并寻求补偿。一般情况下,交易双方会在协议中约定反向分手费,以补偿卖方由于交易未达成所遭受的损失。但SPA并未有关于反向分手费的约定,而是约定卖方在买方故意重大违约的情况下才有权获得救济。针对此项,我们建议一方面中资企业可以约定反向分手费的数额并表明该费用是并购协议项下唯一的救济方式,或者尽量减少反向分手费的数额,甚至如文思海辉一样取消该条款并规定只有在故意且重大违约的情况下,卖方才有权获得一定金额的救济。另一方面,将CFIUS审批作为前提条件的同时,可以尝试将包括未通过CFIUS审查在内的一切与CFIUS有关的事项归入不可抗力条款或者免责条款,约定卖方由此遭受的损失属于不可抗力所造成的损失,买方不承担或者仅在一定情况下(如欺诈)承担一定的补偿责任,同时卖方无权要求担保方就此项损失进行赔偿。

  3. 本案双方的另一争论焦点之一在于该中资公司是否为SPA当事人进而承担SPA下的责任。买方声称SPA中当事人的定义并未包含 该中资母公司,并且SPA明确约定了只有合同当事人承担责任,非当事人的关联方并不承担SPA中的责任。此外,在担保协议中,该中资公司和内斯明确约定内斯不能根据SPA追究其责任。最终,法院采纳了此观点,将其排除在本次诉讼之外。类似交易中,卖方为确保买方具有足够的资金收购自身以及赔偿交易失败的损失,一般会要求买方的母公司进行担保和股权出资承诺,买方母公司一般利用子公司进行交易以避免承担无限责任。我们建议,为避免买方母公司承担并购协议下各项义务的风险,可将并购协议当事人限制于买方,同时买方在同卖方签订并购协议时应明确卖方不可要求买方的关联方承担并购协议下的任何责任,且买方母公司在同卖方签订担保协议时可以进一步约定卖方仅仅能依据该担保协议向买方母公司追究责任而非并购协议。这样一来,买方母公司承担的责任将被极大地限制。

  4. 买方母公司担保范围和程度的确定。本案中的担保协议约定,在文思海辉根据SPA 第10.02(b)(ii)条支付违约金的前提下,内斯无需先向文思海辉提起诉讼,相反可以选择直接向该中资公司要求赔偿。担保协议第一款中也提到该中资公司确认内斯可以向母子公司分别提起独立的诉讼。此外,担保的范围还扩展到包括律师费在内的各类费用,进一步增大了担保人的压力。针对此项,我们建议,买方在与卖方就担保进行谈判时,应当要求卖方首先向违约的买方索取赔偿金,在穷尽一切手段确认买方无法支付赔偿金后,卖方才要求担保人支付未付款项,且就此产生的律师费在内的支出,应当自行承担。.

  5. 根据内斯诉称,未获得CFIUS通过的原因在于文思海辉不断变更和修改提交给CFIUS的通知文件,导致CFIUS对该中资公司的所有权结构不断产生疑问。因此,我们建议,欲进行海外收购的中资企业应当事前完善公司治理结构尤其是所有权结构,随后注重向CFIUS披露信息的完整性和准确性,避免在CFIUS的追问下不断披露出新的信息从而引起CFIUS更大的怀疑和追问,进而产生对国家安全的担忧,最终导致交易被迫延迟乃至搁浅。



FIRRMA and Its Implications for Chinese Investors


Yingjie Wang 王瑛洁

August 31, 2018

On August 13, 2018, President Trump signed into law the National Defense Authorization Act for Fiscal Year 2019, which includes the Foreign Investment Risk Review Modernization Act (“FIRRMA”).

FIRRMA, driven by concerns over China’s acquisition of advanced U.S. technologies, will result in the most significant reform to The Committee on Foreign Investment in the United States (CFIUS) in over a decade. Once implemented through regulations, the changes would expand the types of transactions subject to CFIUS review, place greater scrutiny on inbound investments and outbound transfers of critical and emerging technologies, and make CFIUS filings mandatory for certain transactions.

Currently, CFIUS can review any transaction that could result in “control” of a U.S. business by a foreign person. “Control” of a U.S. business is broadly defined as the power to “determine, direct, or decide important matters affecting an entity.” 31 C.F.R. § 800.204(a). But the expanded CFIUS under the FIRRMA will cover a broader array of transactions including:

  • Any direct or indirect investments by a foreign person in a U.S. business that produces “critical technologies,” is involved in “critical infrastructure,” or maintains “sensitive personal data” that if compromised could imperil national security. Additionally , such investment could afford the foreign person a) access to any material nonpublic technical information about the business; b) membership or observer rights on the board of directors or equivalent governing body of the business or the right to nominate an individual to a position on the board of directors or equivalent; or c) any involvement other than through voting of shares in substantive decision-making right regarding those above-mentioned covered aspects of the business.

  • Certain changes in a foreign investor’s existing rights with respect to the above-mentioned covered U.S. business;

  • The purchase or lease by, or a concession to, a foreign person of certain real estate that a) is located within, or will function as part of, an air or maritime port; or b) is in close proximity to military installations, or other sensitive national security facilities or properties of the U.S. Government; c) could reasonably provide the foreign person the ability to collect intelligence on activities being conducted at such an installation, facility, or property; or d) could otherwise expose national security activities at such an installation, facility, or property to the risk of foreign surveillance. (The only two exceptions would be: (I) a single housing unit[1] or (II) a real estate in urbanized area.[2])

  • Any other transaction, transfer, agreement, or arrangement that is designed or intended to circumvent or evade CFIUS jurisdiction.


FIRRMA explicitly expands coverage to many non-controlling investments that were arguably not within the scope of prior law. The areas with increased scrutiny would include but would not limit to the health care, semiconductor, robotics, artificial intelligence, nanotechnology, and biotechnology, insurance, financial, and consumer/retail industries.[1] FIRRMA also grants CFIUS the authority to conduct new reviews of investments in a U.S. company if a foreign person’s rights would change such that the foreign person acquires control of the business. It will be important for companies to track and submit comments on the administration’s efforts to identify and control the export of these technologies.

Even though the law has been expanded greatly compared to previous law, passive investments may still qualify as exclusions from the new law if: a) a fund is managed exclusively by a general partner (or an equivalent) and such person is not a foreign person; b) the advisory board or committee with foreign person(s) (or the foreign person) does not have the ability to approve, disapprove or otherwise control any investment decision of the fund, or decision made by general partner (or the equivalent); and c) the foreign person does not have access to material nonpublic technical information as a result of participating on the advisory board or committee.

In addition to the expanded coverage, certain transactions would be subject to mandatory declarations under the new law. Although in the past CFIUS would from time to time request that the parties make a filing or review covered transactions on its own, filing was still voluntary per the prior law. However, FIRRMA mandates “declarations” (as distinct from notices) for certain transactions that have substantial foreign government interests directly or indirectly unless such investments remains passive. Under FIRRMA, CFIUS would enjoy expanded authority to define “substantial interests.” Some factors for consideration would include: if the voting interest of a foreign government exceeds 10% (less than 10% would not be substantial) and the means by which a foreign government could influence the transaction. The mandatory declarations, with their link to foreign investors in which foreign governments have a “substantial interest,” appear to be aimed squarely at Chinese investors, especially Chinese state-owned enterprises, among others. Many Chinese companies, including publicly traded ones, have Chinese government shareholders. In the past, foreign investors always had the option to forego a CFIUS filing, but under FIRRMA, that option will no longer be available for certain foreign investments.

The new law would also expand CFIUS’s authority to suspend a transaction. Under the prior law, the President had the sole power to suspend or prohibit a transaction, and CFIUS only had the ability to recommend that the President look into the transaction. Under the new law, CFIUS may suspend a transaction at its sole discretion. FIRMMA also imposes a new filing fee of up to $300,000 per transaction.

Differences between the old and new law are summarized in the following chart:












And what is the specific impact that the new law will have on Chinese entities and individual investors?

In a nutshell, unlike in the past when only controlling investments invited CFIUS review, certain non-passive investments in U.S. businesses, certain real estate investments, and any non-passive investment with substantial interests from the Chinese government will become subject to CFIUS review. To qualify for exemption from CFIUS review, investments in these covered areas would have to meet the strict and narrow definition of “passive investment,” and the investment could not involve substantial foreign government interest. For example: an investment from a Chinese person in a VC fund whose general partner is a U.S. citizen, in which such Chinese person has no access to nonpublic material information and/or controllability or decision-making power over the fund, may qualify as “passive investment” under the new law.

Furthermore, under the new law, the Secretary of Commerce shall submit to Congress and the CFIUS a report specifically on Chinese investment. Investors may expect expanded information disclosure requirements in connection with any direct investment made by Chinese entities. These disclosures include but are not limited to: the total investment disaggregated by ultimate beneficial owner; the industry classification code; a breakdown of the investment by the government and non-government including volume and sector; the type of the investments in each category; the number of the affiliates of entities in China, and the valuation and the total employees for any publicly-traded U.S. affiliate of such entity.

Following the passage of FIRRMA, many details will be finalized through the rule-making process. Parties interested in providing comments should be attentive to the rulemaking schedule. Please pay close attention to our further newsletters and analyses regarding this issue.




  • 外国投资者对生产关键技术、参与关键基础设施、或持有敏感个人数据且一旦数据泄露将影响国家安全这三类美国公司的直接或间接投资,且此投资还能使外国投资者a)全面接触到关于公司的重要非公开技术信息;b)获得董事会或对应管理层席位或观察权,或获得董事或对应职位的任命权;或c)获得任何除股票投票权以外可以影响到公司实质性决策的权利。

  • 外国投资者在上述公司投资后其拥有的权益将发生变更;

  • a)位于或用于机场或海港;b)极为接近军事基地或美国政府的其他敏感国家安全设施;c)外国投资者可从投资地上的活动中收集到情报;或d)可能使国家安全活动受到外国监控风险(仅有的两个例外为独立住宅单元[1]和在城市化区域的房地产[2])

  • 任何旨在规避外国投资委员会审查的交易、转让、合约或安排。























Yuqiang Xing 邢玉强

July 06, 2018

On July 5, 2018, the Securities and Exchange Commission (the “SEC”) issued an order accepting Credit Suisse’s an Offer of Settlement (the “Offer”). Credit Suisse has agreed to pay $24.9 million plus $4.8 million in interest to settle the SEC’s findings that Credit Suisse hired friends and family of foreign government officials in Asia in order to win investment banking business, in violation of the Foreign Corrupt Practices Act and internal accounting controls provisions of the Securities Exchange Act of 1934. 

 The SEC disclosed that between at least 2007 and 2013, Credit Suisse provided valuable employment to the relatives and friends of certain foreign government officials in the Asia-Pacific region (“APAC”) as a personal benefit to the requesting officials in order to obtain or retain investment banking business or other benefits for the bank. During the six-year period, Credit Suisse offered employment to more than 100 individuals referred by or who had some connection to APAC foreign government officials. This included more than 60 employees and interns referred by foreign government officials at more than 20 different Chinese state-owned entities (“SOEs”). Credit Suisse HK and its affiliates obtained deals from referring officials’ SOEs totaling tens of millions of dollars in revenue during this period.

 In seeking approval to hire or promote such referred candidates, rather than highlighting the skills or experience of the candidates, Senior Credit Suisse managers in APAC referenced particular business or mandates that had been or could be gained as a result of the Referral Hire.

For example, One SOE executive emailed a senior Credit Suisse banker to refer a candidate who had a “very good and close relationship” with senior management at the SOE, and wrote that hiring the Referral Hire would “bring [Credit Suisse] the big surprise in the near future if you could coordinate with CS Asian team to arrange a position in CS team in Beijing.” As a Credit Suisse employee explained: “Relationship hires have to translate to $” or “the relationship is worthless to our organization.” In such situations, Credit Suisse’s referral hires often lacked technical skills, were less qualified, and had significantly less banking and other relevant experience.

 As a result of the aforementioned conduct, the SEC found that Credit Suisse violated Section 30A of the Exchange Act which prohibits any issuer with a class of securities registered pursuant to Section 12 of the Exchange Act, from corruptly giving or authorizing the giving of, anything of value to any foreign official for the purposes of influencing the official or inducing the official to act in violation of his or her lawful duties, in order to obtain or retain business. Credit Suisse was also found to have violated Section 13(b)(2)(B) of the Exchange Act, which requires issuers to devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances.

 The SEC imposed sanctions agreed to in Credit Suisse’s Offer.  The outcome in this case is reminiscent of an earlier case in 2016, in which JPMorgan Chase & Co. agreed to pay more than $130 million to settle the same charges by the SEC.

Need to mention is that the United States Department of Justice announced on the same day that Credit Suisse  HK agreed to pay a $47 million criminal penalty for its role in a scheme to corruptly win banking business by awarding employment to friends and family of Chinese officials. As part of the agreement, Credit Suisse  HK and its parent company Credit Suisse AG also agreed to continue to cooperate with the Department in any ongoing investigations and prosecutions relating to the conduct. So Credit Suisse would have to pay a total of $77 million in fines.


美国证券交易委员会披露, 至少从2007年至2013年, 亚太地区的瑞信通过提供有价值的就业机会给某些外国政府官员的亲戚和朋友,作为利益交换获得或保留银行投资业务等其它好处。在6年期间,瑞信向100多名与亚太地区外国政府官员有联系的个人提供了就业机会,其中包括在20多家中国国有企业任职的符合FCPA定义的“外国政府官员”推荐介绍的60多名员工和实习生。作为回报,在此期间瑞信香港及其附属公司从这些官员所在国企获得了营收金额总计达数千万美元的交易。

在为上述被推荐候选人获得雇佣或晋升寻求内部批准时,亚太地区的瑞信高级经理们不是突出这些候选人的技能或经验,而是特意提及瑞信已经或可能基于同意“推荐聘用”而获得某些特定业务或资质。例如,一位国企高管曾给一位瑞信资深银行家推荐候选人与该国企的高级管理层有着“非常好、非常密切的关系”,并表示如果瑞信能于近期协调其亚洲团队在北京为该候选人安排一个职位,该候选人将“给瑞信带来巨大惊喜”。这位瑞信资深银行家后来对同事说,那位中国国企高管“特别提出要我们对他推荐的人进行关系雇佣, 并提到这对我们未来赢得这家企业的交易非常重要”。这一切正如一位瑞信的员工所解释的那样:“这种关系雇佣必须转化为金钱”,否则“对我们毫无价值可言”。实际上这些被推荐候选人往往缺乏专业技能,不甚合格,并且明显缺乏银行和其他相关经验。




The Impact of the CFIUS Reform Bills on Chinese Investors


Yuan Zhou 周劭远

June 08, 2018

On May 22, 2018, the Senate Committee on Banking, Housing, and Urban Affairs and the House Financial Services Committee approved bills to “modernize and strengthen” the Committee on Foreign Investment in the United States (“CFIUS”) (S. 2098 and H.R. 5841, respectively). Both are titled the “Foreign Investment Risk Review Modernization Act of 2018” (“FIRRMA”). Although the two bills diverge on a number of issues, they share certain commonality including dual goals of protecting emerging and foundational technologies developed in the U.S. and restricting access to such technologies by Chinese investors. Both bills appear to be targeting Chinese investment in the United States given China’s grand plans issued by Chinese Premier Li Keqiang in May 2015 to bolster high-tech industries and to dominate the world’s crucial technologies by 2025. Due to the large degree of commonality between the two committee’s bills on important issues, it is likely that the Congress will quickly resolve legislative differences between them, with the bill possibly passed to the President before Congress’s recess in August. Below follows a list of legislative reforms put forward by the bills on important topics:


1. Expansion of CFIUS jurisdiction: CFIUS’s current jurisdiction includes the acquisition of a U.S. Company by a foreign person, with its main focus on whether a so-called “covered transaction” might pose a threat to the national security. The new law would expand the authority of CFIUS to include jurisdiction over transactions involving the transfer of emerging or foundational technologies (including from joint ventures), with a particular focus on those technologies that are deemed “essential to the U.S” or which might be seen as likely to make China more competitive, such as chip technology.

2. New Export Control Processes: Both bills have removed the CFIUS’s authority to review the transfer of emerging or foundational technologies as part of joint venture collaborations. In its place, the new bill has created an interagency process between CFIUS and other agencies including the Departments of Commerce, Defense, and Energy in order to control and identify certain technologies. The bill would authorize the Department of Commerce to identify and control the export, re-export, and transfer of those technologies that are deemed critical to U.S. national security and that are not currently defined in the Defense Production Act or any other existing export control law. Thus, the new bill will likely have a significant impact on the early stages of start-up companies or companies seeking technological mergers.

3. Real Estate Investment Restriction: both bills would extend CFIUS’s purview to cover the purchase or lease by a foreign person of real estate located near any area deemed “sensitive” for national security reasons, such as military facilities, or any area which would function as part of an air, land or sea port. However, both bills would exempt the purchase of any “single housing unit” or any real estate in “urbanized areas” as defined by the Census department.

4. Whitelist and Blackist Exemption: both bills limit transactions by investors from “countries of special concern” – i.e., those that would “pose a significant threat to the national security interests of the United States.” The Senate bill would require scrutiny of various types of transactions and exempt investors from countries identified by CFIUS (such as those countries having NATO membership). On the other hand, the House bill defines a “country of special concern” as any foreign country subject to certain export restrictions on military end-use items (currently China, Russia, and Venezuela); any state sponsor of terrorism (Iran, North Korea, Syria, and Sudan); and countries that are subject to a U.S. arms embargo or named as a country of special concern.

5. Short-form Notification: The Committee on Foreign Investment in the United States currently requires that parties file a voluntary notice to CFIUS for transactions. (31 C.F.R 800) However, both Senate and House bills would only require a mandatory declaration to be filed for “transactions involving acquisition of a substantial interest in a U.S. business by a foreign investor in which a substantial interest is owned by a foreign government,” with what constitutes a “substantial interest” to be defined later by CFIUS.

6.  Non-controlling minority investments: Both bills include subjecting non-controlling minority investments in U.S. businesses that operate in crucial U.S. technologies (e.g. chip technology) to be subject to CFIUS review.

7. Passive investment: both bills have redefined “passive investment” in a narrow way (e.g. an ownership stake that is demonstrably passive, or which does not exhibit any indicia of control) with passive investments exempted from CFIUS review under both bills.

8.  Periods of review: The Senator ills purport to extend the initial CFIUS review period from thirty (30) days to forty-five (45) calendar days, and have authorized CFIUS and the Department of Treasury to initiate secondary investigation phases that would be extended for forty-five (45) days and thirty (30) days respectively. The House bill only permits an extension of fifteen (15) days.

From the analysis above, if the new bill is passed before the August recess, it would impose restrictions on China’s foreign investment in the U.S, especially in high-tech fields. Chinese investors should be prepared at the very least for stricter scrutiny, longer review periods by CFIUS, and an expansion of CFIUS’s jurisdiction to include a wider range of transactions with a focus on technology.

今年5月22日,美国参议院金融委员会和美国众议院金融服务委员分别通过了各自版本的美国外国投资委员会(英文缩写为“CFIUS”)扩权法案(分别为S.2098H.R. 5841)。这两项法案的名称均为“2018年外国投资风险评估现代化法案”(英文缩写为“FIRRMA”)。尽管在该案立法细节上两院草案可能有所不同,宗旨却很一致,即:对美国开发拥有的“新兴”或“基础”技术实行更严格的监管控制,以防被战略对手获取。很明显,本次立法的主要针对目标是中国,以应对中国制造2025计划。该计划意在获取领先科技,强化在中国全球范围内相对于美国的竞争力。鉴于两个委员会法案在重要议题上的高度一致性,国会两院可能会积极协调,在八月份休会之前向总统提交统一的法案。目前该两部法案的重点内容如下:

  1. 扩大审查范围:当前生效法案的主要审核对象是将会导致外国人控制美国行业或企业的收购案,重点关注点在所涉交易的外国投资是否会影响美国国家安全。而决议之中的FIRRMA法案希望扩大审查范围,从只关注企业并购扩大到合资企业,并对某些可能会让中国超过美国的新兴技术加强审查(比如芯片技术)。

  2. 改革管辖权,组建新的执行部门:参议院法案和众议院法案最重要的改革就是CFIUS不再具有对跨国合资公司技术转换具有管辖权,而是通过建立一个创建一个由商务部,能源部,国防部,以及其他部组成的跨机构部门来增加出口管制条款,以识别那些不能用于出口的新技术和知识产权。这两项法案并且都要求总统通过商务部长来认定什么是对国家安全至关重要,但目前包括《国防生产法》在内的法律尚未定义何为“新兴和基础技术”,也未明确对该等技术的出口、再出口和转让加以管制。因此如果美国企业对外出售技术时涉及知识产权等问题,不用得到CFIUS批准,但是要满足跨机构部门的出口管制条款。此次的CFIUS改革将对处于早期发展阶段的美国科技公司以及涉及发展成熟的公司的并购和发展合作关系交易产生重大影响。

  3. 相关房地产业务受限:新的参众两院法案都对接近军事基地或者其它政府基地的不  动产投资继续纳入CFIUS审核,包括一个外国主体购买或租赁位于或将作为航空口岸、陆地口岸或海港一部分的房地产。但是最新的法案豁免了购买单人住房单元或在任何在城市周边地区购买房地产的投资。

  4. 按白名单和黑名单分类相关国家:参议院法案将对来自对美国的国家安全利益构成重大威胁的国家的外国投资者的各类交易进行审查,因此投资涉及到与美国签署了共同防御协议的国家(即“白名单”)将不用接受CFIUS管辖。众议院法案更进一步地将“特别关注国家”定义为“在军事最终用途物品上受某些出口限制的国家(目前为中国、俄罗斯和委内瑞拉);任何支持恐怖主义的国家(伊朗、朝鲜、叙利亚和苏丹);以及受到美国武器禁运并被列为特别关注国家的国家。”

  5. 替代性的短格式申报:之前的法案规定当事人可以选择主动提交正式申报文件(Notice),现在的法案提供了替代性的申报方式,当事人就“受CFIUS管辖的交易”可以选择主动提交声明(Declaration), 同时,强制要求“外国政府拥有重大权益(“Substantial Interest”)的外国投资者”收购美国企业重大权益时提交声明(“Declaration”)。具体何为“重大权益”,CFIUS将会在未来几个月给出相关解释。

  6. 加强对外国投资者的非控制投资领域监管。新的参众两院法案都规定,对美国至关重要的技术投资的外国投资者,即使是非控制性的投资也都要接受CFIUS管辖。

  7. 被动投资:新的法案缩小了被动基金的定义(比如说外国投资者对基金没有决定性的控制),并且将不受最新法案的监管。

  8. 审核时间更加有利:时间上从申报起草到提交,新的参议院法案做出了关于审查期限的几点变化,将最初的审查期限从之前的30天延长到了45天,并授权CFIUS在“异常”案件中将调查期限从45天到75天。众议院法案却只允许延长15天。


The Impact of the Dodd-Frank Financial Reform Act on Chinese-owned Banks in the United States

《多德-弗兰克法》 (Dodd-Frank) 最新修正的重点内容及其对在美中资银行的影响

Yuan Zhou 周劭远

June 08, 2018


On May 24th, 2018, President Donald Trump signed into law the biggest rollback of financial regulation since the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) was enacted in 2010. The new law, “Economic Growth, Regulatory Relief, and Consumer Protection Act (S. 2155),” made targeted changes to several major provisions of the Dodd-Frank Act.

The Dodd-Frank Act was created to establish an enhanced prudential regulatory regime that automatically applies to all bank holding companies with total consolidated assets of $50 billion or more, as well as to nonbank financial firms that are designated by the Financial Stability Oversight Council (FSOC) as systemically important. A general consensus is that the high compliance costs have hurt the ability of small and mid-sized local banks’ to lend to homeowners and small businesses. Because only the so-called “big banks” have resources available to overcome these compliance costs, the Dodd-Frank Act has pushed thousands of community banks to sell or merge.

The Trump administration has maintained the position that the regulatory burdens of the Dodd Frank Act have slowed economic growth. The new laws would purportedly free banks from high compliance costs. The law has raised the asset threshold for lenders to face stricter Federal Reserve oversight as systemically important financial institutions (“SIFIs”) from $250 billion from $50 billion. In other words, banks with more than $250 billion in assets remain subject to strict Federal Reserve oversight. Those banks would continue to be subject to annual Federal Reserve-run stress tests and company-run stress tests and other enhanced prudential standards, including heightened liquidity requirement, and resolution plan (e.g. living will) requirement. The Federal Reserve would also retain the authority to apply enhanced prudential standards to bank holding companies with total assets between $100 billion and $250 billion on a case-by-case basis. Bank holding companies with total consolidated assets of between $50 billion and $100 billion would be exempt from the Federal Reserve’s enhanced prudential standards. Banks with assets of less than $250 billion would no longer undertake the stress test or need to provide a plan to safely wind down their assets.

The new law aims to give small and mid-sized banks relief from burdensome regulations in order to allow regional banks to do more lending business in a bid to improve the economy. The following are a few provisions that roll back the Dodd Frank regulations and its impact on banks (including Chinese banks) in the U.S.

Impact on Chinese-owned Banks in the United States

Foreign companies with U.S. banking operations, known as “foreign banking organizations” (“FBOs”), are treated as bank holding company (“BHCs”) for purposes of Section 165 of the Dodd-Frank Act.  Under the new law, Chinese banks with more than $100 billion in global total consolidated assets remain subject to all previously applicable enhanced prudential standards, including but not limited to requirements of heightened liquidity, provision of resolution plans (such as living wills) and are subject to stress testing.

Section 401(f) of the new law would provide that any BHC identified as a global systemically important BHC (“G-SIB”) for purposes of the Federal Reserve’s risk-based capital surcharge, regardless of asset size, would be considered a BHC with total consolidated assets of $250 billion or more for purposes of these thresholds and thus subject to heightened liquidity requirement, resolution plan requirement and stress test.

In the past few years, Chinese banks have managed to grow and expand globally. For example, the Bank of China had total assets of more than $50 billion in the U.S. in 2014.  In 2011, 2012, and 2013, the Bank of China was designated as a “G-SIB” by the Financial Stability Board. Therefore, under the new law, Bank of China would remain subject to the full enhanced prudential standards.


Since 2010, the strict oversight requirements of the Dodd-Frank Act have led to the disappearance of many small banks that are unable to afford the high regulatory costs of the Act. The latest reforms purport to help reduce the difficulty for small banks to lend funds. Because the amended bill would also exempt banks with less than $10 billion in assets from the Volcker Rule that prohibits banks from using the deposits of customers to fund high-risk trading, it seeks to help promote economic growth.

For Chinese-owned banks in the United States, the U.S. financial industry is extremely competitive and rigorously regulated. If Chinese banks wish to remain competitive in the U.S., they must put in place adaptive measures in order to comply with the requirements of the new law.

2018年5月24日,美国总统特朗普正式签署了一份两党都支持的议案《经济增长、监管救济和消费者保护法》(S. 2155)。该法是迄今为止对2010年《多德-弗兰克法》进行的最重要的一次调整。2010年《多德-弗兰克法》是在2008年美国金融危机背景下出现的金融改革立法,其特点是严厉和涉及面广,其核心内容是扩大监管机构的权力、限制大金融机构的投机性交易,尤其是加强对金融衍生品的监管来防范金融风险。事实上该法在被贯彻同时也给银行带来了沉重的合规成本,实际上只有大银行才有能力通过大量交易来减低成本,而对小银行而言只能被迫减少金融服务、寻求被兼并甚至直接宣布倒闭。

虽然美国政府多方努力改善,金融危机后美国经济复苏依然缓慢。在此背景之下,特朗普上任后,其内阁认为危机以来严格的金融强监管并没有促进美国经济,甚至在某种程度上束缚了美国生产力的发展。现任政府认为应把放松金融监管,对上述法进行修改。目前法案最主要的改革是放松对资产在2500亿美元以下银行的监管规定,银行以后将不需要执行美联储的年度压力测试 (“stress test”) ,比如 “生前遗嘱” (比如机构要不得不破产,那么就要做到有序地拆分自己的资产)等监管措施。但对于资产在2500亿美元以上的美国大银行仍然必须遵守原法框架下的严格监管要求。


原法第165条和166条规定,对在美国所有资产规模在500亿美元以上的商业银行(包括资产规模在500 亿美元以上的外国银行分支机构)以及被金融稳定监督委员会(又称“FSOC”)认定为具有系统重要性的非银行金融机构,必须遵守资本、杠杆率、流动性、大额风险暴露和压力测试等一揽子监管措施,以此来降低金融风险。而新法则从原来的500亿美元的资本要求提高到2500亿美元,因此按资产规模将会有三类情况:只有资产规模在2500亿美元以上的商业银行或者具有系统重要性的非银行金融机构需要接受美联储年度运行压力测试,以及公司内部也要周期性的自行举行公司压力测试;对于资产总额在1000亿美元至2500亿美元之间的金融机构,美联储还将保留对这些银行控股公司应用更严格的审慎标准的权力,具体情况为个案分析;对于资产在1000亿美元以下的公司将被免于美联储加强的审慎标准。

但目前被美联储认定为具有系统性重要的金融机构的八大银行控股公司仍将继续执行此法中的加强审慎标准,即使这些银行的总资产目前或者将来低于2500亿美元,包括美国银行(Bank of America),花旗集团(Citigroup),摩根大通(JPMorgan Chase) ,富国银行(Wells Fargo) ,高盛(Goldman Sachs),摩根士丹利(Morgan Stanley) ,纽约梅隆银行(Bank of New York Mellon)和道富银行(State Street)。


此外新法第401(f)条规定何被视为对全球金融系统有重要性的银行(又称“Global Systematic Important Bank”),无论资产规模如何,都将被视为其总合并资产达到2500亿美元或更多的金融机构。近年来,中资银行顺应中国开放型经济发展,并且稳步加快国际化进程,比如中国银行(“Bank of China”)在2014年在美国的资产就已经越过了500亿美元的门槛,并且连续在2011,2012, 2013这3年连续被国际银行机构评为对全球金融系统有重要性的银行,因此在新法下该行极可以面临着美国监管机构最严格的审查,包括压力测试以及生前遗嘱等监管测试。



对在美中资银行来说, 美国金融业依然是充分竞争而又体现严格监管的市场,中资银行作为众多被监管对象之一,若要在美保持竞争力,则必须坚持严格遵守包括新法在内的所有法律监管措施。

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