Transactions that are not covered investments include:

(a) An investment by a foreign person in an unaffiliated TID U.S. business that does not afford the foreign person any of the access, rights, or involvement specified in § 800.211(b). (See the examples in paragraphs (f)(1) and (2) of this section.)

(b) An investment by a foreign person who is an excepted investor in an unaffiliated TID U.S. business. (See the example in paragraph (f)(3) of this section.)

(c) A transaction that results or could result in control by a foreign person of an unaffiliated TID U.S. business. (See the example in paragraph (f)(4) of this section.)

(d) A stock split or pro rata stock dividend that does not afford the foreign person any of the access, rights, or involvement specified in § 800.211(b). (See the example in paragraph (f)(5) of this section.)

(e) An acquisition of securities by a person acting as a securities underwriter, in the ordinary course of business and in the process of underwriting.

(f) Examples:

(1) Example 1. In an open market purchase solely for the purpose of passive investment, Corporation A, a foreign person that is not an excepted investor, acquires seven percent of the voting securities of Corporation X, an unaffiliated TID U.S. business. Assuming no other relevant facts, the acquisition of the securities is not a covered investment.

(2) Example 2. The Committee concluded all action under section 721 with respect to a covered investment in which Corporation A, a foreign person that is not an excepted investor, acquired a four percent, non-controlling equity interest with board observer rights in Corporation B, an unaffiliated TID U.S. business. One year later, Corporation A proposes to acquire an additional five percent equity interest in Corporation B, which would result in Corporation A holding a nine percent, non-controlling equity interest in Corporation B. The proposed investment does not afford Corporation A any additional access, rights, or involvement with respect to Corporation B, including the access, rights, or involvement specified in § 800.211(b). Assuming no other relevant facts, the proposed transaction is not a covered investment.

(3) Example 3. Corporation A, a foreign person who is an excepted investor, proposes to acquire a four percent, non-controlling equity interest in Corporation B, an unaffiliated TID U.S. business. Pursuant to the terms of the investment, a designee of Corporation A will have the right to observe the meetings of the board of directors of Corporation B. Assuming no other relevant facts, the proposed transaction is not a covered investment.

(4) Example 4. Corporation A, a foreign person who is an excepted investor, proposes to purchase all of the shares of Corporation B, an unaffiliated TID U.S. business. As the sole owner, Corporation A will have the right to elect directors and appoint other primary officers of Corporation B. Assuming no other relevant facts, the proposed transaction is not a covered investment. It is, however, a covered control transaction. Whether Corporation A is an excepted investor and whether Corporation B is an unaffiliated TID U.S. business are not relevant to the determination of whether the transaction is a covered control transaction. (See § 800.301.)

(5) Example 5. Corporation A, a foreign person that is not an excepted investor, holds 10,000 shares and board observer rights in Corporation B, an unaffiliated TID U.S. business, constituting 10 percent of the stock of Corporation B. Corporation B pays a 2-for-1 stock dividend. As a result of this stock split, Corporation A holds 20,000 shares of Corporation B, still constituting 10 percent of the stock of Corporation B. The investment does not afford Corporation A any additional access, rights, or involvement with respect to Corporation B, including those specified in § 800.211(b). Assuming no other relevant facts, the acquisition of additional shares is not a covered investment.