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Chinese Military Companies Trading Ban: Overview of OFAC's Ongoing Guidance | Proskauer Rose LLP


III. To Whom Does the Executive Order Apply?   
The ban on transactions applies to “any United States person,” which is defined as “any United States citizen, permanent resident alien, entity organized under the laws of the United States or any jurisdiction within the United States (including foreign branches), or any person in the United States.”  That means that hedge funds and fund managers organized in the United States are subject to the Executive Order, as well as U.S. branches of foreign entities.  The question of whether an entity is a “U.S. person,” is a fact-intensive inquiry that includes an analysis of its touchpoints with the U.S.  Accordingly, offshore funds with U.S. managers, or foreign funds where a majority of investment interests are held by U.S. persons, can potentially be deemed “U.S. persons” and subject to OFAC’s jurisdiction.  ....

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Overview of Chinese Military Companies Trading Ban OFAC Guidance


Tuesday, February 2, 2021
On November 12, 2020, the Trump Administration issued an Executive Order prohibiting U.S. persons from trading securities and related derivatives in “Communist Chinese Military Companies” (CCMCs), effective 60 days later on January 11, 2021, and then extended to January 28, 2021.  The Order, which was amended on January 13, 2021, prohibits U.S. persons from “any transaction in publicly traded securities, or any securities that are derivative of, or are designed to provide investment exposure to such securities” of a CCMC.  Under the Amended Order’s terms, a “transaction” is a “purchase for value, or sale, of any publicly traded security.”  To date, there are 44 companies that the Department of Defense (DOD) has determined to be CCMCs for which trading by U.S. persons is prohibited.  The Order contemplates adding other companies to that list. ....

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