Determining Prohibited Investments: U.S. Executive Order on Outbound Investment

There are more questions than answers that have come out of the recent executive order banning American investment that could enhance a country of concern’s military, intelligence, surveillance, or cyber-enabled capabilities through the advancement of technologies and products in particularly sensitive areas.

To avoid a case-by-case review of the outbound investment, the Treasury Department has implemented a reporting requirement. This means that companies are fully responsible for ensuring compliance with the new rule and must rely on their own due diligence.

Furthermore,  the Treasury Department, in its fact sheet, is considering the possibility of creating an "exception" for certain types of passive and other investments. This exception would apply to investments in publicly-traded securities, index funds, mutual funds, exchange-traded funds, certain investments made as a limited partner, committed but uncalled capital investments, and intracompany transfers of funds from a U.S. parent company to its subsidiary.

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