Background
On November 12, 2020, U.S. President Donald Trump issued Executive Order 13959 (the Executive Order ), which prohibits U.S. Persons from purchasing publicly traded securities of 35 Chinese companies identified as Communist Chinese Military Companies ( CCMCs ) or engaging in any transaction in any securities that are derivative of, or are designed to provide investment exposure to prohibited CCMC securities. Under the Executive Order, U.S. Persons cannot make purchases of CCMC securities effective January 11, 2021 and have until November 11, 2021 to divest from these securities.
On December 28, 2020, the U.S. Treasury Department s Office of Foreign Assets Control ( OFAC ) issued requirements regarding restrictions and processes in connection with the Executive Order.
On December 28, 2020, the U.S. Treasury Department’s Office of Foreign Assets Control (“
FAQs”) that clarify the scope of Executive Order (“
E.O.”) 13959, the basis for OFAC’s new Chinese Military Companies sanctions program. These FAQs define key terms and clarify how OFAC will interpret E.O. 13959’s prohibition against U.S. investment in the securities of Communist Chinese Military Companies (“
CCMCs”), which goes into effect on January 11, 2021. In general, like previous sanctions programs, the new FAQs show that OFAC will read commonly used terms much more broadly than their common usage might suggest. Now that OFAC has clarified its stance on E.O. 13959, those operating in the investment management sector, especially banks, broker-dealers, investment advisers, and funds should review their assets to determine whether E.O. 13959 could affect their operations. The FAQs represent a Trump Administration decision to continue an aggressive approach toward CCMCs, a