DEFINITION of 'Exon-Florio Provision'
A provision that allows the president of the United States to suspend or block the foreign acquisition of a U.S.-based company for reasons of national security. The Exon-Florio provision only allows for the acquisition to be blocked if there is clear evidence that the foreign acquiring party could threaten national security through its control of the acquired company and the provisions of law don't provide the adequate authority for the U.S. to protect national security.
BREAKING DOWN 'Exon-Florio Provision'
The Exon-Florio Provision was instituted by the Committee on Foreign Investment in the U.S. (CFIUS) and was implemented in 1988. It is covered under Section 721 of the Defense Production Act of 1950. This provision can reduce the level of direct foreign investment as foreign companies may be prevented from carrying out acquisitions.