Page 70 - The CFIUS Book

THE CFIUS BOOK
4.1.5.3. Security Control Agreement (SCA) and Special Security Agreement (SSA)
The SCA and SSA options are similar in that they each impose various industrial security and export control measures through an institutionalized set of company practices and procedures.85 The SCA and SSA both have the following characteristics:
l Theyrequireactiveinvolvementinsecuritymattersofseniormanagementand certain Board members (outside directors), who must be cleared U.S. citizens;
l TheyprovidefortheestablishmentofaGovernmentSecurityCommittee(GSC) to oversee classified and export control matters; and
l They preserve the foreign owner’s right to be represented on the Board (inside directors) with a direct voice in the business management of the company while denying unauthorized access to classified information.86
A company’s choice of an SCA or SSA, however, depends on the foreign investor’s ownership and control over the cleared entity, as described below.
4.1.5.4. SCA
The Security Clearance Agreement
may be used only when the company
is not effectively owned or controlled
by a foreign entity. Typically, the SCA
is used where the foreign investor
holds only a passive, minority interest
in the cleared entity.87 However,
unlike a Board Resolution, an SCA
entitles a foreign interest to
representation on the company’s governing board.88 While the foreign owner may have representation on the governing board of the cleared contractor, that representation may only relate to the cleared company’s unclassified contracts. The foreign representative still may have no influence or control over the cleared contractor’s classified contracts.89 The SCA option requires the cleared company to adopt less stringent industrial security and export control measures than the SSA option and requires no access limitations to classified information.90
THE SCa OpTIOn rEqUIrES THE ClEarEd COmpany TO adOpT lESS STrIngEnT IndUSTrIal SECUrITy and ExpOrT COnTrOl mEaSUrES THan THE SSa OpTIOn and rEqUIrES nO aCCESS lImITaTIOnS TO ClaSSIFIEd InFOrmaTIOn.
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