On December 18, 2025, President Trump signed into law the Fiscal Year 2026 National Defense Authorization Act (“NDAA”) that contains in Title LXXXV a revised version of the previously introduced Comprehensive Outbound Investment National Security Act (“COINS Act”). The COINS Act codifies and expands the existing Outbound Investment Security Program (“OISP”) that restricts US outbound investment in certain sensitive technologies. The NDAA passed Congress with significant support reflecting bipartisan consensus to implement an outbound investment review program that the US government had been considering for several years. The COINS Act largely builds on the OISP, but contains several substantive changes to outbound investment, including a broader set of covered countries and technologies as well as new and existing categories of excepted transactions that may provide more certainty for investors in capital markets. The NDAA also contains provisions with implications for trade. Those issues are discussed in a separate blog post here.
Significantly, the COINS Act does not come into effect immediately and the US Department of the Treasury (“Treasury”) has issued guidance reminding investors that US persons should continue to act in full compliance with the existing OISP. The existing OISP will remain in effect until Treasury issues implementing regulations following a rulemaking process, which must be completed no later than 450 days after the passage of the NDAA (i.e., March 2027). This follows on the previously announced review of the OISP by President Trump in the America First Investment Policy Memorandum (as reflected in our prior blog post here). The COINS Act authorizes $150 million at Treasury for each of the next two fiscal years for OISP. This is an indication that Treasury will have significant resources at its disposal to continue to implement and enforce the OISP and build out the program. For comparison, in fiscal year 2025, including any fees collected, the Committee on Foreign Investment in the United States’s operating budget was approximately $45 million.
Background
The OISP became effective on January 2, 2025 pursuant to Executive Order 14105 and its implementing regulations at 31 C.F.R. Part 850. Under the OISP, US persons (i.e., US citizens and legal permanent residents, wherever located, entities organized under the US law and their foreign branch offices, and persons located in the United States) are prohibited from undertaking or must notify Treasury regarding certain investments involving “covered foreign persons,” which are individuals and entities that have a nexus to a “country of concern” engaged in specified sensitive activities involving semiconductors and microelectronics, quantum information technologies or artificial intelligence (“AI“). Treasury has until now only identified the People’s Republic of China (including Hong Kong and Macau) as a “country of concern.” For more information regarding the existing regulations, please see our previous blog posts about the OISP here and here.
Key Changes to the OISP
The COINS Act codifies the existing OISP and modifies the existing program in significant ways which will impact how investors evaluate investments in certain technologies in countries of concern.
- Expanded Geographic Scope
In addition to China (including Hong Kong and Macau), the COINS Act expands the definition of “country of concern” to include Cuba, Iran, North Korea, Russia, and Venezuela under the Maduro regime. Because US economic sanctions already prohibit or restrict US investment in these countries, the effect of this change is expected to be minimal.
- Expanded Technological Coverage
In addition to semiconductors and microelectronics, quantum information technologies, and AI already covered under the OISP, the COINS Act expands the outbound prohibition and notification requirements to cover certain investments in hypersonic systems and high-performance computing and supercomputing sectors of countries of concern. Together with the existing covered technologies, these sectors are referred to as “notifiable technologies” and “prohibitedtechnologies.” Treasury’s implementing regulations are expected to specify the parameters of these technologies similar to the existing OISP.
- Expanded Definition of “Covered Foreign Person”
The COINS Act revises the definition of “covered foreign person” to include any foreign person that is:
- incorporated in, has a principal place of business in, or is organized under the laws of a country of concern;
- a member of the Central Committee of the Chinese Communist Party or member of the political leadership of a country of concern;
- the state or the government of a country of concern, as well as any political subdivision, agency, or instrumentality thereof;
- subject to the direction or control of any entity described in subparagraphs (a) through (c); or
- owned in the aggregate, directly or indirectly, 50% or more by an entity or a group of entities described in subparagraphs (a) through (c).
This definition is broader than the scope of the definition under the existing OISP and may increase the difficulty an investor has when determining whether a transaction is subject to prohibition or notification because the investor will need to determine whether a counterparty is “subject to the direction or control” of a covered foreign person.
Notably, the COINS Act definition of covered foreign person would replace the current OISP’s “covered foreign person” test that captures entities that derive more than 50% of their revenue or income or that incur more than 50% of their capital expenditures or operating expenditures from a covered foreign person. Under the OISP, these financial metrics can provide the jurisdictional hook to cover persons with interests in an entity from which they derive more than 50% of certain financial metrics, but the COINS Act abandons this rule. How this will be implemented by Treasury remains uncertain, though we expect it will ease the diligence burden for US persons complying with the existing rules.
- Knowingly Directing Notifiable Transactions
Under the existing OISP, US persons are prohibited from knowingly directing a transaction by a non-US person that the US person knows at the time of the transaction would be a prohibited transaction if engaged in by a US person. The COINS Act expands the “knowingly directing” prohibition to “notifiable transactions” as well. However, it is unclear what the impact of this change will be and what new requirements will be imposed on US person executives and directors of foreign companies. It seems that US person directors and officers of foreign companies will need to recuse themselves from all covered investment activities related to prohibited or notifiable technologies. Until the new regulations are implemented, it will be important for US person directors and officers of foreign companies to continue to ensure that they do not knowingly direct prohibited transactions and be prepared to comply with any new prohibitions implemented with respect to notifiable transactions when the regulations are issued.
- Expansion of Exceptions and Exemptions
The COINS Act codifies and expands “exceptions and clarifications” that carve out certain activities from the scope of the outbound prohibitions, including:
- any transaction that the value of which the Secretary determines is de minimis;
- any category of transactions that the Secretary determines is in the national interest of the United States;
- transactions involving certain publicly traded securities;
- certain transactions by limited partners or their equivalent in investment funds and other pooled investment vehicles;
- “ancillary transactions” (including underwing services) undertaken by financial institutions;
- full buy-out transactions by US persons of covered foreign persons;
certain “secondary transactions;” - “ordinary or administrative business transactions” as may be defined by revised OISP regulations;
- intercompany transfers; and
- any transaction completed before the date of the enactment of the title.
Many of these categories of transactions overlap with the existing OISP, but some do not and investors will likely be able to take advantage of more exceptions to stay outside of OISP jurisdiction.
For example, under the COINS Act, “ancillary transactions” include underwriting services, including the temporary acquisition of an equity interest for the sole purpose of facilitating underwriting services, payment processing, settling, clearing, or sending, credit rating services, and other services ordinarily incident to the provision of financial services. Treasury has explained in both the regulations as well as its FAQs that the OISP covers an underwriter’s acquisition of an equity interest in a covered foreign person that is not yet publicly traded as part of its underwriting services. If included in the implementing regulations issued by Treasury, this new exception would represent a victory for industry, which argued during the rulemaking process for the existing OISP that certain capital markets transactions should be exempt from the outbound prohibition and notification requirements.
Shortly after the NDAA was signed into law, Treasury issued updated FAQs on the OISP, including several FAQs related to capital market transactions and underwriters that clarify several issues raised by industry about capital market transactions, including follow-on offerings, convertible bond offerings, and IPO subscriptions.
- Tools to Provide Additional Industry Guidance
The COINS Act authorizes the creation of two mechanisms to provide investors with additional guidance about compliance with the OISP.
- Treasury is authorized, but not required, to create a publicly accessible, non-exhaustive database that identifies covered foreign persons that are either engaged in a prohibited technology or a notifiable technology.
- Treasury must establish a mechanism for the public, including Congress, stakeholders, investors, and nongovernmental organizations, to submit evidence on a confidential basis regarding whether a foreign person is a covered foreign person in a prohibited technology or notifiable technology.
Both of these mechanisms were debated during the OISP rulemaking process, though Treasury ultimately rejected them. Since under the COINS Act the database is optional, Treasury could decide to continue with the status quo.
- Non-Notified Process
The COINS Act directs Treasury to create a non-notified program to identify covered national security transactions not notified to Treasury or that violated a prohibition under the rules. Although we understand Treasury has already been conducting outreach regarding transactions it believes are within the scope of the OISP, this new authority coupled with dedicated funding and staffing will likely increase Treasury’s enforcement efforts and investors should be on notice that involvement in transaction involving a prohibited or notifiable technology may lead to an inquiry from Treasury.
Looking Ahead
The COINS Act requires Treasury to issue regulations within 450 days of its enactment (i.e., March 2027). Given the focus of the Trump administration on trade and China, it is possible that the regulations could be issued on a shorter timeframe. In the meantime, investors will need to continue to comply with the current OISP prohibitions and notification requirements pending any updates to the regulations that may be issued pursuant to the COINS Act. Moreover, investors should closely monitor the upcoming Treasury regulations and consider providing comments when requested.
