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Alternative Market Briefing

Other voices: The impact of CFIUS on private equity and hedge fund investors

Monday, March 02, 2020

By: Abbe Dienstag, Richard Gilden Kramer Levin Naftalis & Frankel

On Feb. 13, 2020, final regulations became effective updating and refining rules regarding transaction reviews by the Committee on Foreign Investments in the United States (CFIUS). These regulations, which until now have been in interim form, implement the previously enacted Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA). Together with FIRRMA, the new regulations significantly expanded the authority of CFIUS to a much broader range of transactions and investments. FIRRMA may have been motivated by heightened concerns over acquisitions involving foreign government-associated purchasers, particularly involving China, and the prevention of security-related critical technologies falling into the hands of hostile state actors. But the broad reach of the statute and regulations, especially given their complexity and the absence in many cases of a clearly defined scope of application, has the potential to affect a wide swath of transactional actors. These include private equity firms and hedge funds that count foreign nationals and foreign governmental entities among their investors. The recent effectiveness of the new regulations offers a timely opportunity to review the impact that CFIUS and its filing and review procedures are likely to have on these funds and their investors.

Overview

CFIUS is an interagency federal government consortium that reviews transactions that may resul......................

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