Treasury Proposes Expanded Outbound Investment Rules: What Investors in Critical Technologies Need to Know

On October 22, 2026, the US Department of the Treasury (Treasury) issued a Notice of Proposed Rulemaking (NPRM) to implement the Comprehensive Outbound Investment National Security (COINS) Act.

As discussed in our prior alert, the COINS Act codified Treasury’s Outbound Investment Security Program (OISP) and required its expansion. Also as previously discussed, the OISP, effective January 2, 2025, has prohibited certain outbound investments by US persons in Chinese and China-related companies focused on semiconductors, microelectronics, quantum computing, information technologies and artificial intelligence (AI).

In addition, the OISP requires US persons to notify Treasury of other types of investment in Chinese companies operating in these sectors.

The NPRM would expand the OISP by adding new “countries of concern,” three new covered technology sectors, additional categories of “covered foreign persons” and a stricter knowledge standard.

Most notably, the NPRM would prohibit any US person investment in a covered foreign person developing any artificial intelligence (or “superintelligence” or “SI” as defined in the NPRM) system.

The COINS Act does not have retroactive effect. Therefore, a transaction completed before any final rule implementing the law becomes effective would not be subject to the new restrictions. The COINS Act requires Treasury to issue new regulations or update the existing OISP regulations by March 13, 2027. The current OISP remains in effect until the effective date of a final rule.

Public comments to the NPRM are due by December 7, 2026.

Key Changes From the Current OISP

• SI becomes fully prohibited. The NPRM would prohibit investment in a covered foreign person developing any SI system, eliminating the current notification requirement for US person investments in certain types of China-related AI companies, and the current training-compute and end-use thresholds for prohibited transactions.
• Expanded countries of concern. In addition to China (including Hong Kong and Macau), Cuba, Iran, North Korea and Russia are named as countries of concern. Given that the Maduro regime no longer exists, Venezuela does not meet the definition of a country of concern.
• More sensitive technology sectors. The NPRM would add the high-performance computing (HPC)/supercomputing, hypersonic systems and biotechnology sectors, joining semiconductors, quantum and SI (formerly AI).
• Diligence bar rises. Treasury would weigh whether investors considered information Treasury previously provided, and notifiable transactions would need to include far more transaction detail.
• New guidance mechanisms and exceptions. The NPRM would add a non-binding Treasury feedback process, a $50,000 de minimis exception for notifiable transactions, and new exceptions for underwriting (including temporary equity acquisitions to facilitate underwriting), bank lending and other secondary services.

Key NPRM Provisions

1. Expanded Countries of Concern

The NPRM would adopt the COINS Act definition of “countries of concern” covering the People’s Republic of China (PRC) (including Hong Kong and Macau), Cuba, Iran, North Korea, Russia and Venezuela under the regime of Nicolás Maduro Moros.

Treasury stated that because the United States recognized Delcy Rodríguez as head of state on March 5, 2026, Venezuela does not currently meet the definition of a country of concern. Cuba, Iran and North Korea are embargoed countries, and there are currently sanctions prohibiting US persons from investing in Iran. Accordingly, China remains the practical focus.

2. New and Expanded Technology Sectors

• Semiconductors: The NPRM would maintain existing prohibitions and expand covered investments to include investments in country of concern entities engaged in radiation-hardened integrated circuits (ICs), photonic ICs and high-bandwidth memory with a memory bandwidth density above 2 GB/s/mm², aligning with Export Control Classification Number (ECCN) 3A090. Investments in country of concern entities engaged in other, non-prohibited IC design, fabrication and packaging activities would remain notifiable.
• Superintelligence: The NPRM would restrict US person investment in country of concern entities that develop any SI system, broadly defined to include generative models, agentic harnesses and SI-enabled robots and autonomous systems. Fine-tuning a third-party model strictly for internal, non-commercial use would not by itself constitute development.
• Quantum: The NPRM would extend current prohibitions to investments in country of concern entities engaged in the development of algorithms and applications for quantum computing and quantum information science.
• HPC/supercomputing: The NPRM would extend current prohibitions to investments in country of concern entities engaged with certain advanced ICs and add a notification requirement for investments in country of concern entities engaged with high-bandwidth, low-latency interconnects.
• Hypersonics: New prohibitions would apply to investments in country of concern entities engaged in activities related to hypersonic systems, certain propulsion systems, certain related materials, test facilities and digital twin/thread technology. New notification requirements would apply to investments in country of concern entities engaged in activities related to sensors, control equipment and related software and materials for hypersonic systems.
• Biotechnology: The NPRM would add a new, wide-ranging prohibition covering investments in country of concern companies working with bio-engineered compounds (including pharmaceuticals and biofuels), brain-computer interfaces, biomanufacturing equipment and facilities, sequencing equipment, bioinformatics tools and hardware or software for automated scientific discovery or experimentation.

3. Covered Foreign Persons and Listed Entities

The NPRM’s definition of “covered foreign person” tracks and would expand upon the current OISP definition of a “person of a country of concern.”

The definition would include any entity subject to the “direction or control” of other foreign persons included in the definition as well as any entity that holds a voting interest, board seat or equity interest in one or more “covered foreign persons” where more than 50 percent of one of several key financial metrics (such as revenue, net income or capital expenditure) of the entity is attributable to such “covered foreign person(s).”

The definition of “principal place of business” would also be expanded to include the location of an entity’s headquarters or main business activities.

Further, any investment that would otherwise be notifiable would instead be prohibited if the target or any affiliate or subsidiary:

1. Appears on a US government list, which would include the lists referenced in the OISP – OFAC’s Specially Designated Nationals and Blocked Persons (SDN) List and Non-SDN Chinese Military-Industrial Complex Companies List, and the Entity List and Military End-User List administered by the Commerce Department’s Bureau of Industry and Security (BIS) – as well as the Department of Defense’s Section 1260H List of Chinese Military Companies and Office of Management and Budget’s BIOSECURE Act list;
   
   
2. Is designated a foreign terrorist organization by the Secretary of State;
   
   
3. Is defined by BIS as a “Military Intelligence End-User”; or
   
   
4. Is 50 percent or more owned, directly or indirectly, individually or in the aggregate by SDNs.

4. Stricter Knowledge Standard

Treasury describes the proposed addition to the knowledge standard one of the “most significant” revisions to the OISP. As under the OISP, US persons would have to undertake a “reasonable and diligent inquiry” to determine whether a transaction is covered or whether any covered foreign persons are involved. Additionally, Treasury would consider whether a US person appropriately considered information Treasury provided to the US person before closing, including Treasury assessments that a target may be engaged in a covered technology.

Although the NPRM does not provide details, such information could potentially arise from Treasury outreach on potentially prohibited or non-notified transactions or from non-binding feedback.

5. Exceptions, Feedback and Enforcement

• Exceptions: The NPRM proposes to exempt certain transactions, including investments in publicly traded securities, certain limited partner (LP) investments of $2 million or less or with binding contractual assurances and intracompany transfers. The NPRM would also exempt from notification requirements (but not from the prohibition requirements) de minimis transactions that are less than $50,000 in the aggregate over the preceding 12 months. The current OISP exception for business development companies would be removed.
  
• Non-binding feedback: The NPRM would allow parties with a direct financial interest in an actual, non-hypothetical transaction could request confidential feedback or anonymized public guidance on whether a deal is prohibited.
  
• Notifications: The current OISP’s 30-day notification deadline and 10-year recordkeeping requirement would remain, but filings would need to include transaction documents, side letters, commercial rationale, and customer and supplier data.
  
• Penalties: The NPRM would provide for civil penalties up to International Emergency Economic Powers Act maximums, as adjusted (currently the greater of $377,000 or twice the transaction value), along with divestment of prohibited transactions. Notably, the NPRM omits language allowing for criminal penalties. As noted in our prior alert, Treasury’s Financial Crimes Enforcement Network (FinCEN) whistleblower program makes rewards available to persons that provide original information regarding violations of the OISP leading to monetary penalties in excess of $1 million, which may increase risks related to enforcement of the OISP.

Requests For Comment

Among other topics, the Treasury Department seeks public comments regarding:

• SI prohibition scope. Treasury’s proposal to prohibit US person investment in all country of concern entities engaged in SI system development and the definition of an SI system.
  
• Database of covered foreign persons. Whether and how to establish a publicly accessible, non-exhaustive database of covered foreign persons, although Treasury’s FAQs state it does not intend to establish such a database at this time.
  
• Confidential guidance process. Its proposal for a non-binding feedback process.
  
• Intracompany transfers. Whether and how Treasury should further define what it means to “maintain operations” within the intracompany transfer exception.
  
• Buyout exception. The COINS Act exception which, on its face, would cover a US person’s buyout of the interests of a single covered foreign person. Treasury acknowledges that this is broader than the current OISP. The NPRM would apply the exception only where a US person acquires all interests held by all covered foreign persons such that the entity is no longer a covered foreign person.