So, as announced on the White House website on Thursday (I still have not received an email from OFAC – I just decided to check if it had shown up on the Recent Actions page), there is a new Executive Order that amends Executive Order 13959. It basically makes a pair of significant changes:
- If you have securities in the firms designated by the Defense or Treasury Departments, you have to divest them by the date specified in Executive Order 13959. It used to be that, once new positions became prohibited, you had a window during which you could close out your position, but you didn’t have to. Now, you have to.
- The Defense Department can designate additional firms whenever it has identified them. Previously, they were limited to the annual report required by the National Defense Authorization Act of Fiscal Year 1999, as amended. And, as you saw already, Defense has already used that new power.
Lastly, 4 new Frequently Asked Questions (FAQs) were issued:
871. What are the compliance obligations of securities exchanges operated by U.S. persons with respect to Executive Order 13959, as amended?
Please see General License 2, “Authorizing Securities Exchanges Operated by U.S. Persons to Engage in Transactions Involving Securities of Communist Chinese Military Companies,” dated January 14, 2021. In general, all transactions and activities by securities exchanges operated by U.S. persons prohibited by section 1(a)(ii) of Executive Order (E.O.) 13959, as amended by the E.O. of January 13, 2021, involving publicly traded securities, or any securities that are derivative of, or are designed to provide investment exposure to such securities, of any entity that is listed on the Office of Foreign Assets Control’s Non-SDN Communist Chinese Military Companies List (NS-CCMC List) after 12:01 a.m. eastern standard time, January 14, 2021, are authorized through 12:01 a.m. eastern time on the date that is 365 days after the date the entity is listed on the NS-CCMC List.
872. Does Executive Order 13959, as amended (E.O. 13959), require United States persons to divest their holdings of publicly traded securities, or any securities that are derivative of, or are designed to provide investment exposure to, such securities of Communist Chinese military companies?
Yes. With respect to any Communist Chinese military company as defined in section 4(a)(i) of E.O. 13959, section 1(b) states that, effective at 11:59 p.m. eastern standard time on November 11, 2021, possession of any such securities by a United States person is prohibited. With respect to any person that is determined to be a Communist Chinese military company pursuant to section (4)(a)(ii) or (iii) of E.O. 13959, section 1(c) states that, effective at 11:59 p.m. eastern standard time on the date 365 days after the date of such determination, possession of any such securities by a United States person is prohibited. United States persons are thus prohibited from holding covered securities after the relevant deadline.
873. How does Executive Order 13959, as amended (E.O. 13959), define the term “transaction”?
Section 4(e) of E.O. 13959 defines the term “transaction” as the purchase for value, or sale, of any publicly traded security.
874. I am a United States person seeking to divest my holdings of covered securities before the relevant deadline stated in Executive Order 13959, as amended (E.O. 13959). For purposes of E.O. 13959, what types of activities are permitted to effectuate such divestment?
Any transaction (including purchases for value and sales) entered into on or before 11:59 p.m. eastern standard time on November 11, 2021, solely to divest, in whole or in part, from securities that any United States person held as of 9:30 a.m. eastern standard time on January 11, 2021, in a Communist Chinese military company as defined in section 4(a)(i) of E.O. 13959, is permitted. Similarly, for a person determined to be a Communist Chinese military company pursuant to section 4(a)(ii) or (iii) of E.O. 13959, any transaction (including purchases for value and sales) entered into on or before 365 days from the date of such determination, solely to divest, in whole or in part, from securities that any United States person held in such person, as of the date 60 days from the date of such determination, is permitted. See FAQ 865 with respect to the permissibility of market intermediaries and other participants engaging in ancillary or intermediary activities that are necessary to effectuate divestiture during the relevant wind-down periods or that are otherwise not prohibited under the E.O.
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