September 28, 2023

Via regulations.gov (Docket ID TREAS-DO-2023-0009)

Meena R. Sharma
Acting Director
Office of Investment Security Policy and International Relations
U.S. Department of the Treasury
1500 Pennsylvania Avenue NW
Washington, DC 20220

Re: Provisions Pertaining to U.S. Investments in Certain National Security Technologies and Products in Countries of Concern Dear

Ms. Sharma:

SIFMA appreciates the opportunity to comment on the advance notice of proposed rulemaking (“ANPRM”) regarding the Provisions Pertaining to U.S. Investments in Certain National Security Technologies and Products in Countries of Concern published on August 14, 2023, by the Department of the Treasury’s Office of Investment Security (the “Proposed Rule”) to implement Executive Order 14105 of August 9, 2023, “Addressing United States Investments in Certain National Security Technologies and Products in Countries of Concern” (the “EO”).

SIFMA recognizes the important role that the Department of the Treasury (“Treasury”) plays in protecting U.S. national security and appreciates Treasury’s efforts to ensure that the Proposed Rule targets investments that implicate the national security concerns described in the EO, without unnecessarily impairing beneficial business activity that otherwise advances U.S. national security and economic interests. In that regard, SIFMA offers comments focused on clarifying the scope of the Proposed Rule, especially as it relates to the U.S. financial services industry and its role in supporting the U.S. economy.

As the EO notes, open capital flows “create valuable economic opportunities and promote competitiveness, innovation, and productivity.” The U.S. financial services industry facilitates this flow of capital, accounting for 10 percent of U.S. gross domestic product. U.S. capital markets fund over 70 percent of all economic activity in the United States and account for 41 percent of all global equity and 40 percent of global fixed income. To preserve the United States’ economic leadership, including the continued use of the U.S. dollar as the global reserve currency, it is critical that the Proposed Rule set out clear and easily applied rules, so as not to introduce uncertainty into a multi-trillion-dollar industry that is a cornerstone of U.S. global competitiveness. To do so would imperil U.S. economic and national security interests, contrary to the purpose of the EO that the Proposed Rule would implement.

As explained more fully below, SIFMA respectfully requests that Treasury consider the following actions as part of the rulemaking process for implementing the EO:

1. Clarify that the obligation to comply with the EO applies only to the entity or individual undertaking the covered transaction (the “Covered Investor”), and not to other parties involved in or tangential to the transaction. In particular, clarify that the scope of “covered transactions” does not include services provided by financial institutions to their customers in respect of covered transactions.
2. Revise the definition of “covered foreign person” to create a standard that can be readily ascertained and applied, and that does not sweep in entities undertaking a de minimis level of activity related to covered national security technologies and products.
3. Provide guidance regarding the “knowledge” standard and the level of due diligence parties are expected to undertake in order to comply with the EO.
4. Issue guidance on enforcement and civil money penalties, including the principles that Treasury will apply in considering whether to impose penalties and in what amount, and when Treasury would refer matters to the Department of Justice.
5. Implement certain other clarifications and changes discussed further in this letter.

SIFMA appreciates Treasury’s consideration of the following comments and looks forward to further exchanges regarding how to implement the EO while preserving the United States’ commitment to open and rules-based cross-border investment.