FOCI Mitigation Instruments
The following guidance is provided regarding the FOCI mitigation instruments
(guidance can be found in DTM 09-019, Sept 2, 2009 (Change 1, 06/08/10) –
“Policy Guidance for Foreign Ownership, Control, or Influence (FOCI)”:
The Board Resolution is used when the foreign entity does not own voting stock
sufficient to elect a representative to the company’s governing board.
SECURITY CONTROL AGREEMENT
The Security Control Agreement (SCA) is used when the cleared company is not
effectively owned or controlled by a foreign entity and the foreign interest is
entitled to representation on the company’s governing board. There are no access
limitations under a SCA.
SPECIAL SECURITY AGREEMENT
The Special Security Agreement (SSA) is used when a company is owned or
controlled by a foreign entity. The SSA has access limitations. Access to
proscribed information by a company cleared under a SSA may require that the
Government Contracting Activity complete a National Interest Determination to
determine that the release of proscribed information (Top Secret, Sensitive
Compartmented Information, Special Access Programs, COMSEC or Restricted
Data/Formerly Restricted Data) to the company shall not harm the national
security interest of the United States. The SCA and SSA are substantially
identical arrangements that:
PROXY AGREEMENT AND VOTING TRUST AGREEMENT
- Imposes substantial industrial security and export control measures within
an institutionalized set of corporate practices and procedures;
- Requires active involvement of senior management and certain Board members
in security matters (who must be cleared, US citizens) (Officer/Directors and
- Provide for the establishment of a Government Security Committee (GSC) to
oversee classified and export controlled matters (the GSC consists of cleared
- Outside Directors), and;
- Preserve the foreign shareholder’s right to be represented on the Board of
Directors with a direct voice in the business management of the company while
denying unauthorized access to classified information. (Inside Director(s)).
The Proxy Agreement (PA) and Voting Trust Agreement (VTA) are used when a
cleared company is owned or controlled by a foreign entity. The PA and VTA are
substantially identical arrangements whereby the voting rights of the foreign
owned stock are vested in cleared US citizens approved by the Federal Government
(DSS). Neither arrangement imposes any restrictions on the company’s eligibility
to have access to classified information or to compete for classified contracts.
Establishment of the PA or VTA involves the selection of three Proxy Holders or
Trustees who must be directors of the cleared company’s board.
The Proxy Holders or Trustees exercise all prerogatives of ownership with
complete freedom to act independently from the foreign stockholders, with the
The Proxy Holders or Trustees must obtain approval from the foreign shareholder
regarding the following matters:
-The sale or disposal of the corporation’s assets or a substantial part.
-Pledges, mortgages or other encumbrances on the capital stock
-Corporate mergers, consolidations, or reorganization
-The dissolution of the corporation
-The filing of a bankruptcy petition
The Proxy Holder or Trustees assume full responsibility for the voting stock and
for exercising all management prerogatives, except for the above matters.
The company must be organized, structured and financed to be capable of
operating as a viable business entity independent from the foreign shareholder.
Individuals serving as Proxy Holders or Trustees must be US citizens, residing
within the United States, completely “disinterested” individuals with no prior
involvement with the cleared company, the corporate body with which it is
affiliated or the foreign shareholder and they must be eligible for a personnel
security clearance at the level of the facility clearance
Management positions requiring personnel security clearances must be filled by
US citizens residing in the US.
The difference between the Proxy Agreement and the Voting Trust Agreement is
that under the Voting Trust Agreement the foreign owner transfers legal title in
the company to the Trustees that are approved by DSS.
The Appearance of non-government information does not constitute endorsement by the U.S. Army