Treasury Proposes Broad Expansion of Outbound Investment Restrictions

Executive Summary

On October 22, 2026, the U.S. Department of the Treasury (“Treasury”) issued a Notice of Proposed Rulemaking (the “Proposed Rule”) to implement the Comprehensive Outbound Investment National Security Act (the “COINS Act”), which was enacted on December 18, 2025, as part of the National Defense Authorization Act for Fiscal Year 2026. The Proposed Rule, which would be codified at 31 C.F.R. Part 851, would replace the existing Outbound Investment Rule (the “OIR”) at 31 C.F.R. Part 850, which has been in effect since January 2, 2025. Comments on the Proposed Rule are due by December 7, 2026.

As we noted in our December 2025 client alert, the COINS Act codified the core elements of, and statutory authorities underlying, the existing OIR while expanding its scope in certain respects, leaving it to Treasury to define the contours of the program through rulemaking and determine whether it should be meaningfully changed. The Proposed Rule answers that question: if adopted as proposed, it would substantially broaden the program’s reach, particularly with respect to artificial intelligence (“AI”) — referred to as “super intelligence” or “SI” under the Proposed Rule — and biotechnology. Other elements of the Proposed Rule would magnify the OIR’s effect by, for example, expanding the implications for U.S. persons who “knowingly direct” transactions undertaken by non-U.S. companies, broadening the definition of “covered foreign persons” to include companies subject to the direction or control of persons from countries of concern, even where those persons hold only minority ownership interests, and increasing the information requirements for notifications.

In its final rulemaking for the existing OIR, Treasury described the requirements of the OIR as “narrowly scoped to focus on a limited subset of investment activity and to avoid unintended impacts in broader sectors of the U.S. or global economies” — a characterization that is debatable. The preamble to the Proposed Rule makes no comparable claim. If adopted as drafted, the Proposed Rule would prohibit U.S. investment in the People’s Republic of China (“PRC”) and in PRC-linked companies anywhere in the world, across broad sectors of the economy, including companies involved in the development of SI, regardless of end-use or computational power. A regime originally conceived to restrict certain U.S. venture investments in high-tech PRC startups would thus reach a much wider range of economic activity with significant implications for U.S. investment and commercial operations. Indeed, Treasury makes clear in the preamble that the Proposed Rule is intended to address risks related to supply chains and “indigenization” by countries of concern of strategically important technologies. With respect to biotechnology, Treasury states that those risks include “the proliferation of biological weapons, the development of brain-computer interfaces, harm to U.S. supply chain security, and the indigenization by countries of concern of advanced technologies with military, government intelligence, and mass surveillance end uses.”

Treasury states that, in implementing the COINS Act, it seeks to “balance the priority of protecting the national security interest of the United States while, to the extent practicable, minimizing the cost and complexity of compliance, adopting the least burdensome alternative that achieves regulatory objectives, and prioritizing transparency and stakeholder involvement in the process of issuing the rules.” The Proposed Rule’s breadth, complexity, and significant ambiguities, however, raise serious questions about how Treasury has struck that balance.

Our principal observations on the likely implications of the Proposed Rule are as follows:

1. Biotechnology would be added as a prohibited — not notifiable — technology, with the category of prohibited technology defined expansively. Among other things, the Proposed Rule would prohibit covered national security transactions involving covered foreign persons engaged in the “development, engineering, or use of a biological system” “to modify, enhance, produce, or control,” among other things, pharmaceutical compounds, which could sweep in a wide range of pharmaceutical research, development, and manufacturing activities.
2. A broad range of AI-related investment transactions would be prohibited. The Proposed Rule eliminates the OIR’s compute-based thresholds and end-use tests for AI and instead prohibits covered national security transactions involving covered foreign persons that develop “any SI system,” a term that includes, among other things, SI-enabled robots, autonomous vehicles, and unmanned systems.
3. The definition of “covered foreign person” — i.e., investee companies potentially subject to prohibitions or notice requirements — would expand to include entities “subject to the direction or control” of PRC persons, increasing the scope of the OIR and the diligence burden for investors. Rather than a bright-line test, Treasury has adopted a flexible standard that appears similar to the framework for “control” under the Committee on Foreign Investment in the United States (“CFIUS”) regulations.
4. Many longstanding ambiguities under the OIR remain unresolved. The Proposed Rule does not clarify the scope of covered “brownfield” investments, declines to define “joint venture,” leaves open what it means to “maintain” existing operations under the intracompany transfer exception, and raises questions regarding indirect investments through funds.
5. The long-awaited advisory opinion process is exceptionally limited in scope. The non-binding feedback mechanism would be available only for actual (not hypothetical) transactions, would address only whether a transaction is prohibited, and would bind no one — including Treasury. Moreover, Treasury can choose to provide feedback, provide partial feedback, or provide no feedback at all.
6. Criminal penalties would be removed, but notifications would become more burdensome. The Proposed Rule omits criminal penalties (other than for false statements), while significantly expanding the information that must be included in a notification.

Companies and investors with exposure to the covered sectors — particularly AI, robotics, and life sciences — should begin assessing the Proposed Rule’s potential effects on past, pending, and planned transactions, and existing operations in the PRC and other countries of concern.

Executive Order 14105, “Addressing United States Investments in Certain National Security Technologies and Products in Countries of Concern,” issued on August 9, 2023, directed Treasury to implement regulations to prohibit or require notification of certain transactions involving U.S. persons and covered foreign persons. Treasury’s implementing regulations, the OIR, took effect on January 2, 2025, and the OIR prohibits or requires notification for certain transactions undertaken directly or indirectly by “U.S. persons” with PRC or PRC-owned entities, as well as certain other entities with a significant nexus to the PRC (so-called “covered foreign persons”) engaged in specific activities in the semiconductor, quantum information technology, and AI sectors (so-called “covered activities”). The current OIR adopts the term “covered transaction” to refer to specific categories of transactions — including equity investments, certain types of debt financing, greenfield and brownfield investments, joint ventures, and certain limited partner (“LP”) investments — undertaken by U.S. persons involving covered foreign persons.

The COINS Act provides a statutory basis for the OIR and directs Treasury to implement further regulations that expand the existing OIR. Treasury will set an effective date in the final rule, and the OIR will continue to apply to activities of U.S. persons occurring on or after January 2, 2025, and prior to that effective date.

The Proposed Rule largely preserves the OIR’s structure, while changing certain terminology to conform to the COINS Act and significantly expanding coverage in several areas. We address the principal questions it raises below.

1. Which countries are covered?

Consistent with the COINS Act, the Proposed Rule would define “country of concern” to include the PRC (including Hong Kong and Macau), Cuba, Iran, North Korea, Russia, and “the Bolivarian Republic of Venezuela under the regime of Nicolás Maduro Moros.” Given the existing U.S. economic sanctions on Cuba, Iran, North Korea, and Russia, we expect this expansion to have relatively little practical impact for most investors.

Notably, Treasury states in its accompanying fact sheet that, because the United States recognized Delcy Rodríguez as Venezuela’s head of state on March 5, 2026, and the Maduro regime no longer exists, Venezuela does not meet the definition of a country of concern — even though the Proposed Rule continues to list it. Treasury nonetheless cautions that investors should carefully assess whether the investments in Venezuelan entities fall within the scope of the Proposed Rule given that investments outside of a country of concern may be covered by the Proposed Rule.

2. How would the definition of “covered foreign person” change?

Under the Proposed Rule, the definition of a “covered foreign person” generally tracks the OIR’s definition of a “person of a country of concern” — including citizens and permanent residents of a country of concern, entities incorporated in or with a principal place of business in a country of concern, and entities 50% or more owned (i.e., through “outstanding voting interest, voting power of the board, or equity interest”) by such persons — and retains the OIR’s test for entities that hold certain interests in entities that meet the definition of a covered foreign person and that attribute more than 50% of their revenue, net income, capital expenditure, or operating expenses to such entities.

The most significant change is the addition of any entity that is directly or indirectly “subject to the direction or control” of a country-of-concern government, a country-of-concern individual, or a country-of-concern entity. The Proposed Rule would define that phrase to mean “the power, directly or indirectly, to direct or cause the direction of the management or policies of” the entity, “whether through the ownership of voting securities, by contract, or otherwise.” That formulation appears largely similar to the elastic and broad definition of “control” for CFIUS purposes that involves a transaction-specific analysis by CFIUS of the existence of direct or indirect power “to determine, direct, or decide important matters affecting an entity.”

As we noted in our December 2025 client alert, this formulation could substantially increase investors’ due diligence burden. Under the existing OIR, for example, a non-PRC semiconductor company that is 15% owned by a PRC investor with a single board representative generally would not be a covered foreign person absent additional facts. Under the Proposed Rule, however, a U.S. investor would need to assess whether the company is “subject to the direction or control” of its PRC shareholder. It is unclear how a U.S. investor could obtain sufficient comfort that Treasury would not treat the non-PRC company as subject to the direction or control of its PRC shareholder. The U.S. investor would either need to rely on Treasury’s proposed advisory opinion process, which Treasury indicates would be non-binding, or hope that Treasury publishes sufficiently clear guidance regarding the meaning of “subject to the direction or control.” In any case, rather than adopting a bright-line ownership or governance test, Treasury has proposed a facts-and-circumstances standard that would create substantial uncertainty for investors.

The Proposed Rule would also expand the definition of “principal place of business” to include “[t]he location where an entity conducts its main business activities” and clarifies that “[a]n entity may have more than one principal place of business.” Treasury explains that, for example, “if a company is incorporated and has its official headquarters in the United States, but its chief executive officer resides and primarily manages the business in a country of concern, then the company’s principal place of business would be in both the United States and the country of concern.” This would mean that, as another example, if a company is incorporated in and has its headquarters outside of the PRC, but has a CEO — or, potentially, another executive officer—that resides and works in the PRC, that company would be considered a covered foreign person.

3. How would the restricted-party list provisions change?

As under the OIR, a transaction that would otherwise be notifiable would instead be prohibited if the covered foreign person is included on certain U.S. government restricted-persons lists. The Proposed Rule would add two lists — the Department of War’s Section 1260H list of Chinese military companies and “the Office of Management and Budget’s list of biotechnology companies of concern” under the BIOSECURE Act — and, importantly, would extend the prohibition to transactions where any affiliate or subsidiary of the covered foreign person or joint venture is listed. “Affiliate” would be defined broadly to include “a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with” the relevant person. Investors therefore will need to conduct diligence on, screen, and obtain contractual representations from not only the target but its broader corporate family.

4. What transactions would be covered?

The Proposed Rule would define “covered national security transactions” to include, among other things:

• A U.S. person’s direct or indirect acquisition of an equity interest or contingent equity interest in a covered foreign person;
• Certain debt financing;
• Entrance into a joint venture;
• Conversion of a contingent equity interest or debt;
• Greenfield and brownfield investments;
• “Knowingly directing” a covered national security transaction by a foreign person in certain cases; and
• Certain LP investments in non-U.S. pooled investment funds.

Although these are the same categories of transactions covered under the current OIR, several aspects of the Proposed Rule’s treatment of these transactions merit particular attention.

Joint Ventures

Treasury again declined to define “joint venture,” relying instead on what it characterizes as the term’s plain English meaning — “the contribution of capital and/or assets by two parties and the sharing of profits and losses” — and clarifying that a covered joint venture does not require the formation of a new entity. We expect this provision will continue to create confusion given the lack of clarity about the extent to which it is intended to apply in circumstances not involving the formation of a new entity, especially if the rule is expanded to biotechnology as proposed.

Relatedly, the Proposed Rule and Treasury’s FAQs indicate that certain “[c]ontractual arrangements (other than those for technology transfer or technical knowledge transfer) or the procurement of material inputs for any covered national security transactions” would be excepted as “secondary” transactions. This provision, which is taken from the text of the COINS Act, could be read to suggest that contractual arrangements involving “technology transfer” or “technical knowledge transfer” would themselves be covered national security transactions. However, other than the uncertainty described above for joint ventures, we do not interpret the Proposed Rule to apply to contractual arrangements generally, regardless of whether they contemplate the transfer of technology or technical know-how. Instead, we interpret this language as reflecting a statutory exception for a type of transaction that could have been, but would not be, covered by the Proposed Rule in the first place.

Indirect investments through funds

Under both the existing OIR and the Proposed Rule, a U.S. person generally would not be deemed to acquire an “indirect equity interest” in a covered foreign person merely by acquiring an LP interest in a U.S. investment fund that subsequently invests in that person. Treasury nevertheless states, in the Proposed Rule’s preamble, that “U.S. person investments in venture capital funds, private equity funds, ‘funds of funds,’ or other pooled investment funds with pre-existing investments in a covered foreign person may constitute an indirect covered national security transaction.” (Second emphasis added.) It is not entirely clear what Treasury means here. Treasury may be suggesting that the OIR would cover a U.S. person’s acquisition of an LP interest in a fund that already holds an interest in a covered foreign person. However, because the fund already holds an interest in the covered foreign person, such an investment would not necessarily provide new capital to the covered foreign person: proceeds might instead remain in the fund’s own capital reserves for future investments or, in a secondary sale, accrue to the selling LP. Consistent with Treasury’s existing guidance regarding indirect covered transactions, such an investment would not constitute a covered national security transaction because “the U.S. person has no knowledge at the time of the transaction that the investment is intended for a covered foreign person.” Treasury may have some other scenario in mind, and clarification would be helpful.

Greenfield and brownfield investments

As noted, the Proposed Rule retains the OIR’s coverage of the “[a]cquisition, leasing, or other development of operations, land, property, or other assets in a country of concern that” will result in “[t]he establishment of a covered foreign person” (a greenfield investment) or “[t]he engagement of a covered foreign person in a prohibited technology or notifiable technology” (a brownfield investment). As we have noted previously, the scope of covered “brownfield” investments has been a source of considerable uncertainty under the OIR, and the Proposed Rule does not resolve it. In the final rulemaking for the existing OIR, Treasury described a brownfield investment, at least in the context of “development,” as “the build-out, expansion, or retrofitting of facilities or land.” The Proposed Rule does not provide any additional context about how to interpret the scope of the greenfield and brownfield investment provisions, though in the fact sheet accompanying the publication of the Proposed Rule, Treasury referred to a brownfield investment as an “other corporate expansion.” The ambiguity regarding the scope of these provisions takes on heightened importance given the Proposed Rule’s addition of biotechnology and the prohibition of all covered national security transactions involving the development of SI.

5. What technologies would be covered?

The Proposed Rule would cover six technology sectors: semiconductors and microelectronics; SI systems; quantum information technologies; high-performance computing and supercomputing; hypersonic systems; and biotechnology. The last three are new, with biotechnology added using Treasury’s discretionary authority under the COINS Act. We summarize the prohibited and notifiable technologies below.

Semiconductors and microelectronics

The Proposed Rule would maintain the OIR’s existing prohibitions and the notification requirement for the design, fabrication, or packaging of any integrated circuit not specified in the definition of “prohibited technology,” while adding:

• Development or production of any integrated circuit not described in the definition of “prohibited technology”; and
• Development or production of equipment not described in the definition of “prohibited technology” that is designed or intended for use in the design, fabrication, or packaging of any integrated circuit.

The Proposed Rule would also expand the prohibitions of the OIR to include covered national security transactions involving covered foreign persons that engage in:

• Development or production of any commodity, material, software, or technology designed or intended for use in or with deep ultraviolet lithography fabrication equipment, in addition to extreme ultraviolet lithography fabrication equipment;
• Development or production of any radiation-hardened integrated circuits, photonic integrated circuits (including development of optical components, co-packaged optics, or silicon-photonics integration), and integrated circuits manufactured from silicon carbide, III-V compound semiconductors, or ultrawide bandgap semiconductors; and
• Development or production of high-bandwidth memory with a memory bandwidth density greater than 2 gigabytes per second per square millimeter.

The Proposed Rule would also update the definition of dynamic random-access memory (“DRAM”) within the definition of “prohibited technology” to shift from the OIR’s technology-node test to memory cell area, memory density, and through-silicon-vias per die thresholds.

Super intelligence systems

Reflecting Executive Order 14434, “Inaugurating the Era of Super Intelligence,” the Proposed Rule replaces the term “AI system” with “SI system.” More significantly, Treasury would prohibit covered national security transactions involving covered foreign persons that develop any SI system, eliminating the notification tier for this sector entirely. The OIR distinguished among prohibited, notifiable, and non-covered AI systems based on training compute (e.g., 10^25 and 10^23 computational operations) and designed or intended end uses. Treasury explains that, because developers increasingly improve model capability through means other than training compute, “no single measure, benchmark, or threshold is currently sufficient to distinguish advanced models.”

The definition of SI system would include any system that operates using an SI model, “including an SI agent harness and an embodied SI or physical SI system (e.g., SI-enabled: industrial robots, bipedal or humanoid robots, quadruped robots, other mobile robots, autonomous vehicles, and unmanned systems).” Moreover, prohibited development of an SI system would include not only the development of a proprietary SI system, but also the development of any third-party SI system where the relevant covered foreign person “enhances or extends the capability of such third-party system.” Treasury gives the following examples: “developing an agentic harness layer with a third-party SI model enhances and extends the capability of the third-party model by enabling autonomous execution of action loops; managing memory and context; or using intermediate or hidden reasoning or self-correction, among other functions, to solve complex tasks and format feedback prior to producing user-facing outputs.” Given the pervasive incorporation of SI capabilities into commercial products and services, this prohibition could reach many companies in countries of concern, as well as any companies elsewhere that are “subject to the direction or control” of covered foreign persons.

The Proposed Rule does contain a somewhat expanded carve-out for use of third-party SI systems. Under the Proposed Rule, “[u]se of an off-the-shelf third-party SI system strictly for internal, non-commercial purposes (including customization, configuration, or fine-tuning of a third-party SI model or machine-based system strictly for internal, non-commercial use (e.g., not for sale or licensing)) does not constitute development of an SI system solely on that basis.”

Quantum, high-performance computing, and hypersonics

The Proposed Rule would maintain the OIR’s prohibition of covered national security transactions involving covered foreign persons engaged in quantum-related activities, as well as adding development of algorithms and applications for quantum computing to the definition of “prohibited technologies.” The Proposed Rule would also maintain the existing prohibition on covered transactions involving covered foreign persons engaged in the development, installation, sale, or production of certain supercomputers, while adding a requirement to submit a notification regarding a covered national security transaction involving a covered foreign person that develops or produces “high bandwidth, low-latency interconnects for high performance computing, including interconnects for system-on-chip, system-in-package, scale-up networks, and scale-out networks.”

For the new hypersonics sector, the Proposed Rule would prohibit covered national security transactions involving covered foreign persons that develop or produce hypersonic systems, certain propulsion systems, certain materials, testing facilities, and certain digital twin and digital thread technologies, and require notification for covered national security transactions involving covered foreign persons that develop or produce certain sensors, guidance, and control systems and certain software when capable of use in a hypersonic system.

Biotechnology

The addition of biotechnology is among the most consequential aspects of the Proposed Rule. All covered biotechnology activities would be prohibited; there is no notification tier and no biotechnology-specific exception. The proposed prohibited activities include:

• The development, engineering, or use of a “biological system” — or any component of a biological system — to modify, enhance, produce, or control certain restricted or novel agents and toxins, energetic materials, novel or high-performance functional materials, pharmaceutical compounds, including small molecules, polymers, vaccines, blood and blood components, allergenics, cell and gene therapies, and monoclonal antibodies, and biofuels;
• The development or production of brain-computer interfaces;
• The development, construction, or production of biomanufacturing equipment; and
• The development or production of biological sequencing technology, certain flow cytometers and cell sorters, certain mass spectrometry instruments, computational or bioinformatics tools, and hardware, robotics, or software for automated scientific discovery or experimentation.

The reach of the biotechnology prohibitions will turn largely on the meaning of “biological system,” which is undefined and not limited to human biological systems. Read literally, the term could capture a wide range of biopharmaceutical research, development, and manufacturing activities because those activities regularly “use” “components” of a “biological system” to “modify, enhance, produce, or control” “pharmaceutical compounds.”

Treasury’s preamble suggests that some of this breadth is intentional, but Treasury has also requested comment on whether “biological system” and “pharmaceutical compounds . . . should be more precisely scoped to focus on advanced or frontier technologies,” suggesting that the scope could shift as the rulemaking proceeds.

Because the Proposed Rule covers greenfield and brownfield investments, the biotechnology prohibition would affect not only M&A and equity investments, but also U.S. companies’ abilities to establish or expand their own biotechnology operations in countries of concern. Although the Proposed Rule would not prohibit continued use of contract partners for clinical trials, development, or manufacturing in countries of concern, restrictions on a company’s own affiliate operations could impair its ability to oversee those activities. Moreover, as explained above, Treasury’s potentially broad conception of joint ventures will continue to create confusion, particularly given the lack of clarity about the extent to which it is intended to apply in circumstances not involving the formation of a new entity.

6. What transactions would be excepted? 

The Proposed Rule would retain most of the OIR’s excepted transactions, including:

• Investments in securities traded on an exchange or the over-the-counter market;
• Investments in registered investment company securities;
• Certain LP investments (where committed capital does not exceed $2 million [aggregated] or the LP obtains a binding contractual assurance that its capital in the fund will not be used to engage in a transaction that would be a prohibited or notifiable transaction, as applicable, if engaged in by a U.S. person);
• Investments in derivatives (though subject to a somewhat narrower scope);
• Full buyouts by U.S. persons of all covered foreign person interests in entities and assets located outside of a country of concern where the entities would no longer be a covered foreign person following the acquisition;
• Intracompany transfers;
• Binding, uncalled capital commitments entered into before the effective date of the final rule;
• Certain loan syndications; and
• Receipt of employment compensation by an individual in the form of an award of equity or the grant of an option to purchase equity in a covered foreign person, or the exercise of such option.

The Proposed Rule would also add new exceptions, including:

• For de minimis transactions (not exceeding $50,000 in the aggregate over the preceding 12 months and to include the fair market value of any non-cash consideration, and only for otherwise notifiable transactions);
• “Secondary” transactions, including:
  • Contractual arrangements (not including contractual arrangements for technology transfer or technical knowledge transfer) or the procurement of material inputs for any covered national security transaction (such as raw materials);
  • Bank lending;
  • The processing, clearing, or sending of payments by a bank;
  • Underwriting services including, but not limited to, the temporary acquisition of an equity interest for the sole purpose of facilitating underwriting services;
  • Debt rating services;
  • Prime brokerage;
  • Global custody;
  • Equity research or analysis; or
  • Other similar services;
• Any ordinary or administrative business transaction; and
• Any ancillary transaction undertaken by a “financial institution” as defined in 31 U.S.C. 5312, including:
  • The processing, clearing, or sending of payments and cash transactions for or to a covered foreign person;
  • Underwriting services, including the temporary acquisition of an equity interest in a covered foreign person for the sole purpose of facilitating underwriting services;
  • Credit rating services on behalf of a covered foreign person; and
  • Other services ordinarily incident to and part of the provision of financial services on behalf of a covered foreign person, such as opening deposit accounts, direct custody services, foreign exchange services, remittances services, and safe deposit services.

Treasury did not extend the investment company exception to business development companies and invites comment on whether to do so. Two exceptions warrant particular attention:

Intracompany transfers

The Proposed Rule would except the provision of cash or credit by a U.S. parent to a controlled foreign entity to support operations not in a notifiable or prohibited technology, or to “maintain” operations in a notifiable or prohibited technology in which the controlled foreign entity was engaged prior to the effective date of the final rule. As we noted in our November 2024 alert, the scope of the analogous OIR exception has been a persistent source of confusion. Treasury acknowledges that it is still considering how to define “maintain operations,” and has invited comment on three alternatives: (1) a narrow construction limited to upkeep and maintenance; (2) a broader construction permitting upgrades or improvements to existing operations but not expanded production; or (3) permitting expanded production or improved capabilities, “provided that such improvement does not involve engaging in a different [covered] technology or shifting from a notifiable technology to a prohibited technology.” This issue will be especially important for biotechnology and SI companies with existing operations in the PRC because certain intracompany transactions may become challenging to undertake without potentially triggering a prohibition.

Transactions completed before the effective date

The Proposed Rule would except transactions completed before the final rule’s effective date, although the existing OIR could still apply. It remains unclear whether Treasury will provide a grace period between the final rule’s publication and its effective date, or whether the final rule will take immediate effect — notwithstanding the COINS Act’s directive to “provide a reasonable timeframe for compliance.”

A further question concerns transactions completed before the effective date that contemplate additional investments or conversions after the effective date. Structures involving, for example, tranched equity, options or warrants, future equity purchase rights in licensing agreements, convertible instruments, milestone-based ownership escalators, joint ventures with future buyout rights, or equity tied to completion of a facility could therefore implicate the new rule even if the underlying agreement predates its effectiveness.

7. What would the notification requirements be?

As under the OIR, notifications would be due within 30 calendar days after the completion date of a notifiable transaction (or after acquiring actual knowledge of facts that would have rendered a past transaction notifiable or prohibited), and filers would have to retain the notification and supporting documentation for ten years. Treasury proposes to expand substantially the required contents of a notification to incorporate information it has often sought in follow-up inquiries, including certain information that is commonly required as part of a CFIUS notice. The additional requirements include:

• Specifying that the description of the commercial rationale for the transaction should include:
  • A description of the U.S. person’s plans for involvement in the investment target’s commercial operations and the expected drivers and timeline for return on the investment;
  • Whether the U.S. person plans to transfer or second any employees to the investment target;
  • A description of how the U.S. person learned of the investment opportunity in the investment target, including whether the U.S. person first approached the investment target or vice versa; and
  • A timeline identifying the date on which the U.S. person initially considered making its investment, along with dates and descriptions of any further negotiations leading up to the transaction.
• A copy of all transaction documentation, including any partnership, integration, collaboration, and ancillary agreements or other side agreements relating to the transaction.
• A description of any past, current, or future commercial arrangements between the U.S. person and the investment target, such as customer/supplier relationships, joint development arrangements, or joint marketing arrangements.
• Additional information regarding the covered foreign person to include:
  • A description of the company’s current and expected future products and services;
  • Annual revenue and profitability;
  • Total asset value;
  • Customer make-up;
  • Jurisdictions in which it operates, exports or sells its products or services; and
  • Key suppliers.
• Additional detail in the post-transaction organizational chart of the covered foreign person that includes describing relationships among and between the covered foreign person and the members of its corporate family, including:
  • Percentage of economic or voting interests;
  • Limited partnership interests; or
  • Status as investment adviser or manager.

These additional requirements sit uneasily with Treasury’s stated objective of minimizing compliance costs and complexity and avoiding duplicative reporting requirements.

8. What are the penalties for violations?

The Proposed Rule would omit the criminal penalties available under the OIR (up to $1,000,000 and/or 20 years’ imprisonment), though violations would still be subject to civil penalties up to the greater of $250,000 (adjusted for inflation) or twice the amount of the transaction, and the Secretary could compel divestment of a prohibited transaction. Criminal liability would remain available under 18 U.S.C. § 1001 for knowingly and willfully false statements. The Proposed Rule would also place the burden of proof on Treasury in enforcement actions and require that voluntary self-disclosures include a proposal for mitigation, “which may include divestment or a voluntary disgorgement of profits.”

9. Will investors be able to obtain guidance from Treasury?

As we noted in our December 2025 client alert, one of the greatest compliance challenges under the OIR has been investors’ inability to obtain Treasury guidance resolving interpretive questions. The Proposed Rule would establish a process for requesting confidential, non-binding transaction-specific feedback or anonymized public guidance. Transaction-specific feedback, however, would be available only to persons with a direct financial interest in an actual — not hypothetical — transaction whose material terms appear in a binding document. It would address only whether a transaction is prohibited, not whether it is notifiable. Requests would also be subject to extensive requirements, including the following:

• Submit in writing;
• Address a single transaction;
• Include all relevant and material information bearing on whether the subject transaction would constitute a prohibited transaction, including:
  • Identification of the requester and any other persons joining in the request, including name, address, place of incorporation or organization (if applicable), principal place of business, citizenship, and points of contact;
  • Identification of each party to the transaction (including relevant intermediaries, financing sources, and controlled foreign entities), and each covered foreign person, if known;
  • A detailed description of the contemplated structure of the transaction, including the form of investment, governance and information rights, timing, and completion date;
  • A detailed description of the products, services, technologies, or activities implicated by the transaction and the basis for the requester’s view as to whether such products, services, technologies, or activities may constitute prohibited technology;
  • All operative documents and material term sheets, draft agreements, side letters, and other written materials reflecting the contemplated transaction, as available at the time of submission;
  • Any other information that the requester believes is relevant to the application of this part to the transaction, including any prior submissions to Treasury under the current OIR or the Proposed Rule concerning the same or closely related transaction, or any other information that may be material to the subject transaction;
• Have the request signed by an authorized representative of the requester or by counsel expressly authorized in writing to sign on the requester’s behalf, and the signer must certify:
  • That the request contains a true, correct, and complete disclosure of all material facts and circumstances known to the requester at the time of submission; and
  • That the requester will promptly supplement the request if the requester learns of material changes to facts stated in the request or omissions therefrom.

Even if all information is provided, the request could be declined, answered only in part, or later revoked at Treasury’s discretion. Any feedback would not bind Treasury, any other agency, or any court, although Treasury could consider “whether [a] requester sought and reasonably acted consistent with non-binding feedback” in determining an enforcement response. Thus, companies will need to decide whether the prospect of non-binding feedback justifies providing extensive information about an actual transaction without any assurance that Treasury will respond. Treasury’s proposed approach stands in contrast to the advisory opinion processes for several other national security programs, such as the U.S. Department of Justice’s Data Security Program and the Foreign Agents Registration Act regulations, which set aspirational timelines for agency responses and expressly allow the requesting parties to rely on an advisory opinion to the extent that the information provided was and remains accurate and complete.

Treasury also states in its fact sheet that it does not intend to establish a public database of covered foreign persons at this time (though the preamble indicates Treasury is “actively considering” one), meaning that investors will continue to bear the burden of identifying covered foreign persons through their own diligence.

10. Next steps

Comments on the Proposed Rule are due by December 7, 2026, and Treasury has requested comment on numerous issues. In the meantime, companies and investors should consider:

• Reviewing pending and planned transactions — particularly those with staged or contingent post-closing investments — for potential exposure under the Proposed Rule;
• Updating diligence procedures to address the “direction or control” standard and affiliate-level restricted-party screening; and
• Mapping existing operations, collaborations, and licensing arrangements against the joint venture, greenfield, and brownfield provisions.

If you have any questions regarding the issues discussed in this alert, please contact any of the members of our CFIUS or Life Sciences practices listed below.