EisnerAmper’s Michael Rose Interviewed by Foreign Investment Watch
October 16, 2020
By Sheena Kalia
Michael Rose, a partner at EisnerAmper’s Process, Risk, and Technology Solutions, sat down with Foreign Investment Watch recently to discuss the Committee of Foreign Investments in the United States (CFIUS) risk assessments, audits and mitigation agreements. The discussion explored topics such as pre-filing risk assessment, pitfalls for companies to avoid, controls and procedures to ensure compliance with mitigation agreements and third-party compliance audits amongst others.
During the interview, Michael spoke about some of the key items to review in a risk assessment for transactions pre-CFIUS filing. These steps include asking questions such as:
- Are we a covered transaction?
- Has foreign ownership been verified?
- What is the risk tolerance of not filing with CFIUS?
- Are there other ways to structure the deal such as convertible debt with no control rights, or a bridge loan, to avoid a filing or jurisdiction under CFIUS?
He also spoke about the issues involved when considering whether to make a voluntary filing to avoid a potential CFIUS review post-transaction closing, in order to have the benefit of a safe harbor ruling. If a mandatory filing is not made, CFIUS could impose significant monetary penalties which could include the unwinding of the deal itself. Michael stressed the importance of understanding the mitigation agreement and controls and to subsequently build policies and procedures around the agreement. The policies and procedures should incorporate training, communication and security factors as these help with addressing roles and responsibilities for all parties involved, and engenders communication between legal teams and the security officer/director to help mitigate the risk of any pitfalls. Third-party compliance audits should be conducted to maintain the company’s adherence with these mitigation agreements. Most of the time, these audits are required by the national security agreement and the party conducting the audit is subject to approval by the CFIUS Monitoring Agencies (CMAs). Since the CMAs monitor and enforce the mitigation agreements, having a compliance audit completed can assist with the ongoing monitoring of the agreement. In addition to the topics covered in this blog, Michael Rose’s interview contained important information on CFIUS-related activity in the real estate market and some specific examples and recommendations for companies.