Page 65 - The CFIUS Book

4. parallel Foreign Investment reviews: national Security review and Team Telecom
4.1. National Security Review
The U.S. Government requires a layer of review in addition to CFIUS when a foreign interest or interests invest in companies that do classified work or that have contracts requiring facility clearances (FCL) or personnel security clearances (PCL). The National Industrial Security Program Operating Manual (NISPOM) provides baseline standards for the protection of classified information in situations where foreign investment causes foreign ownership, control, or influence (FOCI) over such companies.
The CFIUS process and the NISPOM
FOCI review are carried out in two
parallel but separate processes with
different time constraints and
considerations.64 If your target is
governed by the NISPOM, and you
are considering a transaction that may
result in foreign ownership or control,
you should prepare for review and
clearance under NISPOM first, since
that process has a longer lead time than the CFIUS process. Moreover, CFIUS will not issue a no-action letter unless the Committee is satisfied that the NISPOM requirements are fulfilled. We also note that anytime the U.S. Department of Defense (DOD) becomes aware of a transaction involving foreign acquisition of a cleared company in which the parties have not filed a CFIUS notification, DOD is required to initiate action to ensure a CFIUS review of the transaction.65
THE CFIUS BOOK
anyTImE dOd BECOmES awarE OF a TranSaCTIOn InvOlvIng FOrEIgn aCqUISITIOn OF a ClEarEd COmpany In wHICH THE parTIES HavE nOT FIlEd a CFIUS nOTIFICaTIOn, dOd IS rEqUIrEd TO InITIaTE aCTIOn TO EnSUrE a CFIUS rEvIEw OF THE TranSaCTIOn.
4.1.1. Cleared Companies
In cases where the transaction is covered by the NISPOM, the cleared company should notify, in writing, the U.S. Department of Defense, Defense Security Service (DSS) of the details of the transaction.63 The failure to notify DSS could threaten the company’s authorization to maintain its facility security clearance. The DSS website suggests that the cleared company should also alert DSS of the transaction by telephone before submitting the written notice under NISPOM 2-302(b).67
65