The Institutional Limited Partners Association (ILPA) submitted a comment letter on the U.S. Treasury Department’s proposed rulemaking on U.S. Outbound Investments to ensure that the final rulemaking does not result in negative unintended consequences for U.S. LPs.

The new Notice of Proposed Rulemaking (NPRM) is a follow-up to the Executive Order and Advanced Notice of Proposed Rule Making (ANPRM) released last year, which provided for a new U.S. national security program meant to protect technologies that are “critical to the next generation of military innovation.” Specifically, it addresses outbound U.S. investments in” countries of concern” as designated by the U.S. government, including the People’s Republic of China.

“We’re pleased to see the latest proposed rulemaking reflect several recommendations from our engagement on Treasury’s initial proposal, including requiring U.S. GPs to be responsible for complying with the rule when raising a fund and excepting U.S. LPs investing in non-U.S. funds below a certain threshold,” said Neal Prunier, ILPA Managing Director of Industry Affairs.

In its letter, ILPA called on Treasury to include an exception in the rulemaking for LPs investing in non-U.S. private funds when an LP’s total capital committed to a fund falls below a 50 percent threshold, inclusive of co-investment capital, at the time of the fund’s final closing.

Further, ILPA asked Treasury to consider language providing LPs who act in good faith to comply with the final rule be protected from unforeseen and unintended liability in circumstances where they did not have access to information required to fully comply.

“We believe it’s possible to land on a final rule that serves national security while affording the private equity industry the clarity and flexibility needed to carry out investments that contribute to the returns of U.S. LPs, and therefore to the U.S. economy,” said Prunier.

MORE: Read ILPA’s Comment Letter and Access Additional Resources