OFAC clarifies stuff about securities

Mr. Watchlist had written OFAC with questions about securities issued by an SDN, but not covered under the Ukraine/Russia-related or Venezuela government securities sanctions. And, a mere 2 or 3 hours later (bravo!), I got back the following response (reformatted for readability):

  • First, for a US person to directly buy or sell in securities of an SDN that would be prohibited, because it would be conveying a benefit on the SDN in assisting with contributing to making a market for the security of the SDN. 
  • Second, where a US person purchases a mutual fund with holdings in multiple investments, one of which includes a security of an SDN, this second situation would place the US investor in a position where it is assumed they did not effectuate the trade or make the decision to invest in the security in question. 
    • Then the issue would first be for the mutual fund company whether it is a US person. If so, then the purchase of the securities would likely be considered prohibited. 
    • For the US investor who bought the mutual fund shares without any role in the purchase of the securities of the SDN by the mutual fund company, the US individual investor perspective in this would be further removed from the activity in question. 
    • There would be several factors included in the review of this US individual investor activity, including the amount of size of the SDN security in comparison to the overall mutual fund portfolio, frequency of the trading activity including duration and length, sanctions program involved, reason to know of this investment, etc. 
  • Third, where an SDN security has already been sold and was not blocked, then with the security out of the US person’s holdings, the US person may provide correspondence to OFAC indicating what happened with any related supporting documents. They are note required to do so, but it is appreciated and considered favorably.

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