Saturday, April 21, 2012

Certificate Pertaining to Foreign Interests, Standard Form (SF) 328

 The SF 328 is used by the contractor and the government to determine whether or not and to what extent the cleared contractor falls under Foreign Ownership Control and Influence (FOCI). The primary concern is always protecting classified information from unauthorized disclosure. As with determining the amount of control a company officer or board member has over classified contracts, the same holds true of foreign entities with which a company may become involved.

In today’s changing world it is not unusual for a cleared company to be involved with international business. If classified contracts are under the control of a foreign entity, the classified information could be in jeopardy of unauthorized disclosure. If a contractor falls under FOCI, DSS will work with the GCA to evaluate the contractor’s ability to mitigate the extent of foreign influence concerning classified information and approve, deny or revoke the FCL.
The SF 328 only has to be completed once unless circumstances change. The following is only to be used as a guide and to help the defense contractor understand the types of questions they will need to answer. All coordination should be made with DSS or similar cognizant security agency. An SF 328 can be found online @
1a. Do any foreign person(s), directly or indirectly, own or have beneficial ownership of 5% or more of the outstanding shares of any class of your organization's equity securities? If yes:
Identify the percentage of any class of stock or other securities issued which are owned by foreign persons, broken down by country. Include indirect ownership through one or more intermediate level(s) of subsidiaries. Indicate voting rights of each class of stock.
Are there shareholder agreements? If yes, attach a copy(ies), and if none, so state.
Indicate whether a copy of SEC Schedule 13D/13G report has been received from any investor.
If yes, attach a copy(ies).
Note: Ownership of less than 5% should be included if the holder is entitled to control the appointment and tenure of any management position.
1b. (For entities which do not issue stock): Has any foreign person directly or indirectly subscribed 5% or more of your organization's total capital commitment? If yes:
Identify the percentage of total capital commitment which is subscribed by foreign persons.
Is there an agreement(s) with the subscriber(s)? If yes, attach a copy(ies), and if none, so state.
Question #2: Does your organization directly or indirectly through your subsidiaries and/or affiliates, own 10% or more of any foreign interest? If yes:
Identify the foreign interest by name, country, percentage owned, and personnel who occupy management positions with the organizations.
If there are personnel from your organization who occupy management positions with the foreign firm(s), identify the name(s), title, and extent of involvement in the operations of the organizations, (to include access to classified information).
Question #3: Do any non-U.S. citizens serve as members of your organization's board of directors (or similar governing body), officers, executive personnel, general partners, regents, trustees or senior management officials? If yes:
Identify the foreign person(s) by name, title, citizenship, immigration status and clearance or exclusion status.
Attach copies of applicable by-laws or articles of incorporation, which describe the affected position(s).
Question #4: Does any foreign person(s) have the power, direct or indirect, to control the election, appointment, or tenure of members of your organization's board of directors (or similar governing body) or other management positions of your organization, or have the power to control or cause the direction of other decisions or activities of your organization? If yes:
Identify the foreign person(s) by name, title, citizenship, and all details concerning the control or influence.
Note: If any foreign person(s) have such power, this question shall be answered in the affirmative even if such power has not been exercised, and whether or not it is exercisable through ownership of your facility's securities, if such power may be invoked by contractual arrangements or by other means.
Question #5: Does your organization have any contracts, agreements, understandings, or arrangements with a foreign person(s)? If yes:
For each instance, provide the name of the foreign person, country, percentage of gross income derived, and nature of involvement, including:
Whether defense/nuclear related or not
Involvement with classified or export controlled technology
Compliance with export control requirements
Where the organization has a large number of involvements and where these involvements are not defense/ nuclear related and represent a small percentage of gross income; the explanation can be a generalized statement addressing the totals by country.
Question #6: Does your organization, whether as borrower, surety, guarantor or otherwise have any indebtedness, liabilities or obligations to a foreign person(s)? If yes:
Provide your overall debt-to-equity ratio (in percentage).
With respect to indebtedness or liability to a foreign person, indicate to whom indebted or liable, what collateral has been furnished or pledged, and any conditions or covenants of the loan agreement. If stock or assets have been furnished or pledged as collateral, provide a copy of the loan agreement or pertinent extracts thereof (to include procedures to be followed in the event of default).
If any debentures are convertible, provide specifics.
If loan payments are in default, provide details.
Question #7: During your last fiscal year, did your organization derive:
a. 5% or more of its total revenues or net income from any single foreign person.
b. In the aggregate 30% or more of its revenues or net income from foreign persons?
If yes to either part of the question:
Provide overall percentage of income derived from foreign sources by country, nature of involvement, and type of services or products.
Indicate if any single foreign source represents in excess of 5% of total revenues or net income.
Indicate whether any classified information is involved.
State whether facility is in compliance with applicable export control requirements.
Question #8: Is 10% or more of your organization's securities held in "nominee shares," in "street names" or in some other method which does not disclose the beneficial owner? If yes:
Identify each foreign institutional investor holding 10% or more of the voting stock by name and address and the percentage of stock held.
Indicate whether any investor has attempted to, or has exerted any control or influence over appointments to management positions or influenced the policies of the organization.
Include copies of SEC Schedule 13D/13G.
Question #9: Do any of the members of your organization's board of directors (or similar governing body), officers, executive personnel, general partners, regents, trustees or senior management officials hold any positions with, or serve as consultants for, any foreign person(s)? If yes:
Provide the name, title, citizenship, immigration status and clearance or exclusion status on all such persons.
Identify, by name and address, each foreign organization with which such persons serve and indicate the capacity in which they are serving.
Include a Statement of Full Disclosure of Foreign Affiliations for every cleared individual who is a representative of a foreign interest.
Question #10: Is there any other factor(s) that indicates or demonstrates a capability on the part of foreign persons to control or influence the operations or management of your organization? If yes:
Describe the foreign involvement in detail, including why the involvement would not be reportable in the preceding questions.

Jeffrey W. Bennett, ISP is the owner of Red Bike Publishing Red Bike Publishing . Jeff is an accomplished writer of non-fiction books, novels and periodicals. He also owns Red bike Publishing. Published books include: "Get Rich in a Niche-Insider's Guide to Self Publishing in a Specialized Industry" and "Commitment-A Novel". Jeff is an expert in security and has written many security books including: "Insider's Guide to Security Clearances" and "DoD Security Clearances and Contracts Guidebook", "ISP Certification-The Industrial Security Professional Exam Manual", and NISPOM/FSO Training" See Red Bike Publishing for print copies of: Army Leadership, The Ranger Handbook, The Army Physical Readiness Manual, Drill and Ceremonies, The ITAR,and The NISPOM

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