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Illustration: Sarah Grillo / Axios

Congress is working on legislation that could theoretically prevent a San Francisco-based venture capital firm from investing in a Los Angeles-based startup. It could also stop a New York-based private equity firm from acquiring an Indianapolis-based tech company.

Bottom line: None of this is intended. But that's the thing about trade wars: They can come with a whole slew of unintended consequences.

At issue is the CFIUS fix bill being pushed by Sen. John Cornyn (R-TX), with bipartisan support in both chambers and from the White House. In its current incarnation, the legislation could prevent U.S. investment funds from investing in sensitive U.S. tech companies (e.g., semiconductors, cybersecurity software, etc.), so long as those funds have any Chinese limited partners.

Investment industry trade groups are working to gain support for carve-outs, arguing that most of these limited partners are passive. And that's gaining some traction in the House, but less in the Senate (so far). Treasury just seems to want a bill done, so it's fairly agnostic.

Complications:

  1. Legislators generally dislike carve-outs.
  2. Many VC funds are currently exempt from most SEC reporting requirements, so it could be difficult for CFIUS to know identities of VC firm LPs, what percentage of the funds rhey hold or if they have control.
  3. Private equity funds do have a bit more scrutiny on them, but Dodd-Frank rollback efforts and SEC budget cuts could soon create VC fund parallels.

There is also a separate discussion about Treasury using emergency powers to restrict Chinese investments in U.S. companies, which could result in reciprocal action that would make it harder for U.S. firms to invest in China.

Go deeper

Updated 13 mins ago - World

Myanmar's deposed leader Aung San Suu Kyi sentenced to 4 years in prison

An anti-coup protest in Yangon, Myanmar.Photo: Hkun Lat/Getty Images

A Myanmar court sentenced the country's ousted leader, Aung San Suu Kyi, on Monday to four years in prison on charges of "inciting public unrest" and breaking COVID-19 protocols, per the New York Times.

Why it matters: It's the first of several verdicts that could result in the 76-year-old Nobel laureate being imprisoned for the rest of her life. The 11 charges she faces have been widely criticised as politically motivated.

3 hours ago - World

Pope Francis denounces European governments' migrant response

Pope Francis adresses refugees at the Reception and Identification Centre (RIC) in Mytilene on the island of Lesbos on Sunday. Photo: Louisa Gouliamaki/Pool/AFP via Getty Images

Pope Francis criticized European countries' response to migrants and asylum seekers during his visit to a refugee camp on the Greek island of Lesbos Sunday.

Why it matters: The pope said "migration is a humanitarian crisis that concerns everyone," but little had changed in the global response to displaced peoples since his first visit to Lesbos five years ago, per a transcript of his remarks. "Human lives, real people, are at stake. ... let us stop this shipwreck of civilization!"

Chris Cuomo accuser: On-air "hypocrisy" spurred report

Journalist Chris Cuomo. Photo: Gilbert Carrasquillo/GC Images

A woman who accused fired CNN journalist Chris Cuomo of sexual misconduct said Sunday she decided to come forward after learning of his comments about women who made similar accusations about his brother. He denies her allegations.

Why it matters: Her attorney Debra Katz said in a statement that she heard "the hypocrisy" of his on-air words about his brother, former New York Gov. Andrew Cuomo, and was "disgusted by his efforts to try to discredit these women," so "retained counsel to report his serious sexual misconduct against her to CNN."