Sovereign Wealth Funds: Laws Limiting Foreign Investment Affect Certain U.S. Assets and Agencies Have Various Enforcement Processes

GAO-09-608 Published: May 20, 2009. Publicly Released: May 20, 2009.
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Highlights

Foreign investors in U.S. companies or assets include individuals, companies, and government entities. One type of foreign investor that has been increasingly active in world markets is sovereign wealth funds (SWF), government-controlled funds that seek to invest in other countries. As the activities of these funds have grown they have been praised as providing valuable capital to world markets, but questions have been raised about their lack of transparency and the potential impact of their investments on recipient countries. GAO's second report on SWFs reviews (1) U.S. laws that specifically affect foreign investment, including that by SWFs, in the United States and (2) processes agencies use to enforce them. GAO reviewed policy statements, treaties, and U.S. laws, and interviewed and obtained information from agencies responsible for enforcing these laws. GAO also interviewed legal experts and organizations that track state foreign investment issues.

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Recommendations

Recommendations for Executive Action

Agency Affected Recommendation Status
Department of Agriculture To enhance their oversight of sectors subject to laws restricting or requiring disclosure of foreign investments, the Chairman of the FCC and the Secretaries of Agriculture and Transportation should review the current sources of the information their agencies currently monitor to detect changes in ownership of U.S. assets-- which are subject to restriction or disclosure requirements applicable to foreign investors--and assess the value of supplementing these sources with information from other government and private data sources on investment transactions.
Closed – Implemented
The Department of Agriculture agreed with our recommendation and indicated that they would use such sources to enhance their ability to detect changes in ownership. In our follow-up with USDA, the cognizant official reported that once the agency became aware of relevant Securities and Exchange Commission (SEC) filings through GAO's report, they began including investor filings made to the SEC as one of the resources Agriculture's Farm Services Agency uses to detect foreign ownership or changes in ownership. In addition, the official reported that she included the SEC resources in training provided to her colleagues. As a result, Agriculture's Farm Services Agency will have better information to detect changes in foreign ownership of relevant U.S. assets.
Department of Transportation To enhance their oversight of sectors subject to laws restricting or requiring disclosure of foreign investments, the Chairman of the FCC and the Secretaries of Agriculture and Transportation should review the current sources of the information their agencies currently monitor to detect changes in ownership of U.S. assets-- which are subject to restriction or disclosure requirements applicable to foreign investors--and assess the value of supplementing these sources with information from other government and private data sources on investment transactions.
Closed – Implemented
In response to GAO's recommendation, the DOT reported that it determined that its processes and sources of information utilized provide sufficient information for tracking the level of foreign ownership of U.S. air carriers. DOT stated that it currently requires new air carrier applicants and existing U.S. air carriers to submit extensive information on the citizenship of each owner for each layer of ownership until ultimate ownership is reached. It stated that its direct access to information is generally sufficient for a full understanding of ownership structure, but that it does supplement direct information with other sources including in part SEC filings and trade journals.
Federal Communications Commission To enhance their oversight of sectors subject to laws restricting or requiring disclosure of foreign investments, the Chairman of the FCC and the Secretaries of Agriculture and Transportation should review the current sources of the information their agencies currently monitor to detect changes in ownership of U.S. assets-- which are subject to restriction or disclosure requirements applicable to foreign investors--and assess the value of supplementing these sources with information from other government and private data sources on investment transactions.
Closed – Implemented
In response to GAO's recommendation, the FCC reviewed the sources of information it monitors to detect changes in ownership of U.S. communications assets that are subject to restriction or disclosure, to assess the usefulness of supplementing its existing system of self-reporting by regulated entities with routine monitoring of investment information from other government and private data sources. The agency reported it concluded that self-reporting by regulated entities, with targeted, case-specific inquiries and use of government and private data sources as warranted to conduct them will ensure that Commission staff has necessary information. Therefore, FCC concluded that routinely monitoring government and private data sources, including SEC's data base on public filings, would be of limited additional value to the FCC.

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