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Global rules on foreign direct investment (FDI)
Cross-border acquisitions and investments increasingly trigger foreign direct investment (FDI) screening requirements.
United States | Publication | October 2019
On September 25, 2019, the US House of Representatives passed the Secure and Fair Enforcement Banking Act of 2019 (or the SAFE Banking Act), with a landslide vote of 321 to 103. The bill, which was first introduced by Congressman Ed Perlmutter on March 7, 2019, generally prohibits US banking regulators from penalizing banks for providing financial services to legitimate cannabis-related businesses and other cannabis-related service providers. The purpose behind the Act is to grant US cannabis companies operating and abiding lawfully under state laws access to the banking system. Allowing state-authorized cannabis companies access to financial institutions is something that is critically important for such companies to grow and to operate effectively and efficiently.
Although 33 states and the District of Columbia have legalized cannabis for medical and/or recreational use, the doors of many financial institutions remain closed to the cannabis industry because cannabis remains illegal at the federal level. Indeed, cannabis remains classified as a Schedule I substance under the Controlled Substances Act, 21 U.S.C. § 801, et seq. As banks are subject to federal regulation, they are understandably concerned about the risk of prosecution. As financial institutions have been generally unwilling to undertake that prosecution risk, lawfully operating cannabis companies have been essentially forced to become cash-only businesses, something that is impractical and dangerous.
The House's historic bipartisan vote on the SAFE Banking Act is a significant step towards explicitly permitting banks to do business with state-legal cannabis companies. Specifically, Section 4 of the bill provides that a depository institution shall not, under federal law, be held liable or subject to forfeiture solely for providing a loan or other financial services to a legitimate cannabis-related business. Moreover, the bill prohibits federal banking regulators from:
In addition, Section 3 of the bill exempts proceeds from legitimate cannabis-related business transactions from federal money laundering laws.
The SAFE Banking Act still must be addressed in the Senate so the legislation's safeguards for banks are not yet in effect. The bill is likely to face an uphill battle in the Senate. But even if the SAFE Banking Act becomes law, nothing in the Act requires a financial institution to conduct business with cannabis-related companies, and several financial institutions have publicly stated that they will not transact with US cannabis companies even if the SAFE Banking Act is passed, unless and until cannabis is legal on a federal level.
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Cross-border acquisitions and investments increasingly trigger foreign direct investment (FDI) screening requirements.
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On February 2, 2024, the Belgian Presidency of the Council of the European Union confirmed that the Committee of Permanent Representatives had signed the Artificial Intelligence (AI) Regulation, referred to as the AI Act. Approval by the EU Parliament followed on 13 March 2024, and the AI Act is likely to appear in the EU’s Official Journal around May 2024. The AI Act aims to establish a stringent legal framework governing the development, marketing, and utilisation of artificial intelligence within the region, thereby marking a significant advancement in the regulation of this burgeoning domain.
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The private credit market and direct lending have grown and diversified immensely in the past decade, offering alternative sources and terms of debt compared to those historically provided by the syndicated leveraged loan and public issuance markets. Consequently, they are fast becoming pivotal components in the capital ecosystem, so much so that the Bank of England consider that the private credit market is currently responsible for approximately $1.8 trillion of debt issuance, which is four times its size in 2015. This growth has been particularly pronounced in Europe and the US but there has also been significant activity in Asia.
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