Pulley vs. Carta for Contractors Managing FOCI and Facility Clearances

A company holding, or pursuing, a facility security clearance gets its ownership reviewed for Foreign Ownership, Control or Influence, FOCI for short, whenever ownership changes meaningfully, including a new investor or an option holder crossing a reporting threshold. Before issuing new equity or letting a large option grant vest into shares, confirm the recipient's citizenship and any foreign affiliations, and loop in whoever manages the facility clearance.

Doing this after the grant is signed is the expensive version of the same conversation. A FOCI review that starts because a new foreign national already holds shares takes longer, and carries more risk to the clearance itself, than one that starts before anything is issued.

The review itself runs through the Defense Counterintelligence and Security Agency, which administers facility clearances and expects the contractor to self-report a FOCI-triggering change rather than wait to be asked. Build a short intake question into the grant process, citizenship and any foreign board seats, foreign investment, or foreign employer, and route anything ambiguous to whoever manages the clearance before the grant is finalized.

FAR 31.205-6 governs how compensation costs, including stock-based compensation, factor into a contractor's allowable and indirect costs. Some forms of stock comp are allowable, some are not, and the treatment depends on the specific grant structure and how the expense is recognized on the books. This is a genuine gray area, not a simple yes or no.

Talk to your CPA or contracts counsel before assuming a new equity plan's expense is fully recoverable on a cost-reimbursable or time-and-materials contract. A plan designed without that conversation can create a rate dispute months after the grants are already outstanding.

Say a contractor grants options to an engineering lead and books the resulting expense against a cost-reimbursable contract's indirect rate without first checking the grant's structure against FAR 31.205-6. If an auditor later disallows part of that cost, the contractor eats the difference on a contract that was supposed to be fully reimbursed, and the rate has to be corrected retroactively across every job it touched.

A cap table platform built for fundraising speed shows who owns what today. A FOCI review wants the history: when did each holder's stake cross a reporting threshold, and was that reported within the required window. Keep a change log, not just a current snapshot, and make sure whoever prepares your annual FOCI certification can pull that history without reconstructing it from board minutes and old cap table exports.

This matters just as much for advisors and consultants as it does for investors. A contractor that grants a handful of advisory options to someone with a foreign employer or a foreign board seat has created a reportable event the same as it would with an investor, and an advisory grant is exactly the kind of small, informal decision that's easy to make without looping in the security team.

Pulley may fit a contractor with a straightforward domestic ownership structure and a small number of grants, where the priority is a clean, current cap table alongside a 409A valuation; it's worth confirming whether the tool covers your compliance workflow or whether you'll handle that separately.

Carta may fit a contractor with a larger, more complex ownership history or multiple funding rounds, or a security team that needs to pull a detailed, dated ownership history when preparing its foreign ownership, control or influence (FOCI) disclosures without rebuilding it by hand each year.

Boards refresh option pools as a matter of course, and it's easy to treat the refresh itself as routine and skip the FOCI check on who's actually receiving the new grants. If a new hire or advisor with foreign citizenship or affiliations receives options as part of that routine refresh, the company can end up with a FOCI-reportable event it never flagged as one.

Build the nationality check into the grant approval process itself, not as a separate step someone has to remember. Whoever approves new option grants should have an easy way to confirm citizenship status before the grant is finalized, every time, not just for grants that look unusual.

Add these checks to every equity grant:

• Screen each new holder for foreign citizenship or affiliations before the grant, including recipients of a routine option pool refresh.
• Have your facility security officer or counsel review any instrument held by a foreign person, including convertible notes, before it converts.
• Keep a dated change log of ownership, not just a current snapshot, so FOCI disclosures can be prepared without rebuilding history.
• Confirm how the specific grant structure is treated under FAR 31.205-6 before it reaches indirect rates.
• Require both finance and security to sign off before a grant is finalized.