On January 6, 2021, the Department of the Treasury’s Office of Foreign Assets Control issued Frequently Asked Questions 863, 864 and 865 to clarify the provisions of Executive Order 13959, “Addressing the Threat from Securities Investments that Finance Communist Chinese Military Companies.” EO 13959, issued on November 12, 2020, prohibits US persons from engaging in any transaction involving the purchase or sale of publicly traded securities, or securities that are derivative of, or designed to provide investment exposure to such securities, of any designated Communist Chinese military company.
In FAQ 863, OFAC provides that, for purposes of EO 13959, US persons are permitted to provide services such as clearing, execution, settlement, custody, transfer agency, as well as back-end and other support services, so long as their services are not provided to US persons engaged in prohibited transactions.
FAQ 864 confirms that EO 13959 prohibits transactions related to securities of Communist Chinese military company subsidiaries, with names that exactly or closely match the names of entities identified in the Annex to EO 13959 (effective January 11, 2021), with a reminder that OFAC has published and will continue to update its list of entities on its website to aid in the implementation of the Order.
FAQ 865 clarifies that market intermediaries and other participants are allowed to facilitate divestment from publicly traded securities of Communist Chinese military companies, including divestment by investment fund managers. The permission not only extends to intermediary activities that are necessary to effect divestiture during relevant wind down periods, but applies to any activity that is not otherwise prohibited under EO 13959. These divestment transactions are permitted for US persons, including investors and intermediaries.
Department of Treasury Recent Actions | Executive Order 13959 | FAQ 863 | FAQ 864 | FAQ 865