A proxy advice is a requirement imposed as part of a proxy agreement by the U.S. Department of Defense`s Defense Security Service for foreign investors who wish to acquire certain U.S. companies. This is for national security reasons and is especially the case for defence companies that participate in top secret contracts. The proxy agreement exists between the foreign company, the U.S. subsidiary that holds classified contracts, and the DSS. A variant is a Special Security Agreement (SSA) in which the company`s board of directors may be composed of both U.S. citizens and nationals of the parent company`s country. In this case, when national security issues are discussed, only U.S. leaders can participate.
THE SSA requires that businesses be run by U.S. law and by U.S. citizens.  In May 2006, the CEO of BAE Systems described the “firewalled” status of BAE, a U.S. subsidiary, BAE Systems Inc., “British executives, including myself, see the financial results; but many areas of technology, products and programs are not visible to us…. The SSA allows us to act as a U.S. company in the United States and provide the highest level of security and integrity in some of the most sensitive areas of national security.  They will strictly comply with all applicable and amended rules, directives and procedures from time to time, including, but not limited to, our code of ethical conduct, insider trading policy, anti-corruption trade policy, transaction guidelines for related parties, special security agreements and internal and disclosure controls; Comply with all applicable U.S. and foreign laws and regulations; and are subject to our decisions and instructions that comply with the obligations entrusted to you. During the period of the special security agreement, the appointments of new directors or alternate directors become final only after approval by the DSS. A proxy board is a board of directors composed exclusively of U.S. citizens responsible for the day-to-day running of the company. In this way, the company`s classified information is “isolated” from foreign operations, but the parent company continues to benefit from possible profits from its subsidiary.
The guidelines and procedures must also ensure that “electronic communications” (as defined in the Special Security Agreement) are not used by any of the related companies to exert influence or control over the business or management of the business in a way that may affect the performance of classified contracts. In the event of a vacancy on the board of directors during the period of the special security agreement, the company will immediately inform the DSS of this vacancy through its agency security officer and any vacancy of the external director is immediately filled. The departments and agencies of the executive meet before approving contractors after B.C. or authorizing the approval of the authorization authorization under a Special Security Agreement (SSA).