Disclosing Investments in Foreign Adversaries Act of 2025

Bill Number

S. 3562

Origin Chamber

Senate

Congress

119th Congress, Session 1

Policy Area

Finance and Financial Sector

Status

Introduced

Latest Action

2025-12-18: Read twice and referred to the Committee on Banking, Housing, and Urban Affairs.

Last Updated

2026-01-22T15:38:39Z

AI-Generated Summary

Purpose

The "Disclosing Investments in Foreign Adversaries Act of 2025" aims to increase transparency in U.S. financial markets by requiring disclosures about investments linked to "countries of concern" (nations considered foreign adversaries, such as those posing national security risks). It mandates the Securities and Exchange Commission (SEC) to amend rules under existing laws to track and report private fund assets and certain exempted securities transactions connected to these countries, helping investors and regulators identify potential risks from adversarial influences.

Key Provisions

• Enhanced Disclosures for Private Fund Advisers (Amendment to Investment Advisers Act of 1940):
• Defines key terms:
• Country of concern: Refers to "covered nations" under U.S. defense law (e.g., China, Russia, Iran, North Korea) and any jurisdiction controlled by them, as determined by the SEC in consultation with the Secretary of State and Secretary of the Treasury.
• Covered investment adviser: Includes registered advisers managing at least $150 million in private fund assets (including affiliates) or those exempt from registration under specific rules.
• Private fund asset: Assets managed by the adviser that belong to private funds (pooled investment vehicles not publicly traded).
• Requires covered advisers to file annual reports with the SEC detailing total private fund assets in countries of concern, broken down by percentage per country.
• SEC determines asset location based on factors like an entity's physical presence, employees, sales, or asset/liability proportions in that country.
• SEC must publish annual public reports listing advisers with any such assets, aggregated by adviser and including percentages (starting one year after enactment).

• Disclosures for Exempted Securities Transactions (New Section 13B in Securities Exchange Act of 1934):
• Applies to "covered exempted transactions": Private sales of securities exempt from full registration (e.g., under rules for small offerings or sales to qualified investors), if they total $25 million or more in a single deal, or $50 million or more over a year.
• Issuers (companies selling the securities) must disclose to the SEC:
• Issuer identity and place of incorporation.
• Links to entities with most assets in a country of concern or incorporated there.
• Amount of securities sold, net proceeds, and beneficial owners (those with significant control or economic interest).
• Intended use of proceeds, including percentages by industry and country (especially if investing in a country of concern).
• The specific exemption relied upon.
• Applies to transactions occurring one year after enactment.
• SEC must issue quarterly public reports on disclosures from issuers incorporated in or linked to countries of concern, or those planning investments there.
• SEC authority to create rules/forms and impose conditions limiting future exemptions for non-compliant issuers.

Significant Changes to Existing Law

• Introduces mandatory, specific disclosures for private fund investments in adversarial countries, which were not previously required under the Investment Advisers Act—advisers currently report general assets but not breakdowns by risky jurisdictions.
• Adds a new section to the Securities Exchange Act requiring transparency for large private securities offerings (exempted transactions), expanding beyond public company filings to include details on foreign ties and proceeds use—previously, these deals had minimal reporting.
• Empowers the SEC to consult with other agencies for designations and to restrict exemptions for violators, creating enforcement tools not explicitly present before.

Potential Impacts

• On Government Agencies: The SEC gains new reporting and rulemaking duties, increasing workload for data analysis and public reports; involves interagency coordination with State and Treasury for country determinations, potentially enhancing national security monitoring.
• On Citizens and Investors: Provides greater visibility into where private investments flow, allowing investors to assess risks from adversarial countries (e.g., economic or security threats), which could lead to more informed decisions and reduced exposure to volatile or sanctioned regions.
• On International Relations: Heightens U.S. scrutiny of investments in countries like China or Russia, possibly deterring capital flows to them and signaling stronger economic decoupling; could strain ties with those nations or encourage allied countries to adopt similar measures.

Main Stakeholders Affected

• Investment Advisers and Private Funds: Large or exempt advisers must comply with annual reporting, facing potential compliance costs and public exposure if invested in countries of concern.
• Issuers of Securities: Companies conducting large private offerings linked to adversarial countries will need to disclose sensitive details, affecting fundraising strategies.
• Investors and Beneficial Owners: Gain access to aggregated data but may see indirect effects like restricted investment options or higher costs passed on from compliance.
• SEC and Regulators: Primary enforcers, with expanded oversight responsibilities.
• Foreign Entities: Companies or governments in countries of concern may face reduced U.S. investment due to transparency requirements.

Notable Legal, Constitutional, or Political Implications

• Legal: Expands SEC's regulatory authority over private markets without altering core exemptions, but introduces penalties via restricted future access—could lead to litigation over "country of concern" designations or disclosure burdens, though it aligns with existing investor protection mandates.
• Constitutional: Appears consistent with Congress's commerce clause powers to regulate securities; no direct free speech or due process issues, as disclosures are factual and limited to financial data.
• Political: Addresses bipartisan concerns over foreign adversary influence in U.S. finance (introduced by Senators from both parties), potentially advancing national security goals amid geopolitical tensions; may spark debate on overreach into private markets or economic protectionism.

This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.

Sponsor

Sen. Scott, Rick [R-FL]

Cosponsors (1)

Sen. Fetterman, John [D-PA]

Recent Actions

• 2025-12-18: Read twice and referred to the Committee on Banking, Housing, and Urban Affairs.
• 2025-12-18: Introduced in Senate

Bill Versions

• Disclosing Investments in Foreign Adversaries Act of 2025 — issued 2025-12-18 — PDF (10 pages)