How Will You Navigate the U.S. Regulatory Landscape?
10 Questions for inbound U.S. investors
Question 6 - How will you navigate the U.S. regulatory landscape?
The United States is an open market economy with a complex, multilayered government system. The country welcomes foreign direct investment, but potential investors should be prepared for a range of regulatory processes at the federal, state, and local levels.
Some of the rules are strictly functional. Other can bring national security, criminal law, and even politics into play. The effort required to meet U.S. requirements can range from filing the right paperwork to making structural or operating model changes. For example, an organization may need to establish legal entities or obtain licenses.
At the federal level, investors may have to win approval from the Committee on Foreign Investment in the United States (CFIUS) and the Department of Defense. In banking, the Federal Reserve must weigh in. Investors may have to satisfy environmental, labor, securities, anti-money laundering, or export control regulations. Depending upon their entity structures, they may also be subject to the Foreign Corrupt Practices Act (FCPA).
State and local
State and local governments may impose other rules that influence decisions such as land use, workforce diversity, regulatory reporting, and environmental behavior. The laws that govern labor unionization vary from state to state as well.
This complex system of overlapping laws and jurisdictions can be a new experience for investors whose home countries are governed more centrally. Each of the regulatory hurdles can be managed with proper diligence – and managing them all simultaneously can take diligence to a new level.
Questions behind the questions
- You’re working to understand how to comply and gain regulatory approval. Have you calculated the cost of these efforts?
- Beyond your own activities and holdings, is there something in your business partnerships or alliances that could color U.S. regulators’ view of your investment?
- How can you structure your plans to make the elements subject to regulatory review severable from other parts of your deal you can’t do without?
- Does your home country have a reciprocal relationship with U.S. regulators that will influence your investment plans?
- Does the company you’re buying provide any products or services to the U.S. government?
Do it now
Identify three deals materially similar to yours and look up the history of their passage through the U.S.regulatory system.
When overseas investors must manage compliance with CFIUS, they should look at it as a process, not a single event.
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