Federal Laws and Regulations Affecting Foreign Investors

As the number of foreign investor visas continues to grow, and investors continue to become more creative with their investment vehicles, it is important to consider the potential issues with established U.S. law that may arise. Foreign investors should become aware of some key reporting and disclosure requirements and ensure that they are in compliance with them. Some key investment-related laws and policies that apply to foreign investors are discussed below.

U.S. Policies Regarding Foreign Investment

As a matter of policy, the United States has always welcomed foreign investors. Three principles govern the United States policy on foreign investment:

  1. Foreign investment should be treated the same as domestic investment except to protect national security and related interests;
  2. Foreign investors from different countries should be granted equal treatment; and
  3. The rights of foreign investors are to be protected. Any taking of an investor’s financial, physical, or intellectual property rights should be done for a public purpose, in a nondiscriminatory fashion and without violating previous contractual arrangement. It should also be accompanied by prompt and adequate compensation.

In general, the U.S. does not enforce any screening, reciprocity, or performance requirements in connection with foreign investments. Instead, the U.S. utilizes various foreign investment disclosure requirements and other statutes and laws designed to protect national security, competition, and key sectors of the economy. Many of these statutes are discussed below.

Statutes Requiring Disclosure of Foreign Investments

There are three major federal statutes that have an impact on foreign investment in the United States. In line with the U.S. policies discussed above, these statutes are information-gathering and disclosure statutes, rather than restriction statutes.

The Securities and Exchange Act of 1934

This legislation requires the disclosure of investment information in a nondiscriminatory manner from all individuals or companies who acquire certain publically held securities. The Act directs any person or group acquiring more than 5 percent of certain securities to submit a filing with the Securities and Exchange Commission (SEC). Foreign investors are treated no differently than American investors under this statute. Among other things, investors must disclose their citizenship and residence and the source and amount of funds used to make the purchase.

International Investment and Trade in Services Survey Act of 1976

This Act authorizes the President of the United States to implement a data collection program with regard to foreign investment in the United States. The stated purpose of this legislation was to use the information to conduct studies and surveys, to study the adequacy of disclosure and reporting requirements, and to publish statistical information. The regulations state that the requirements imposed by this act only apply to those individuals or corporations who control 10 percent or more of the voting securities.

Agriculture Foreign Investment Disclosure Act of 1978

This statute requires any person who acquires, disposes of, or holds any interest in agricultural land to submit a Form FSA-153 to the Secretary of Agriculture with 90 days following the date of acquisition. Agricultural property is defined in the regulations as property in the United States currently used, or if idle, last used within the past 5 years for farming, ranching, forestry, or timber production. There is an exception for land that does not exceed 10 acres and has gross receipts from the sale of farm, ranch, forestry, or timber products that do not exceed $1000.

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