904. Under Executive Order (E.O.) 13959, as amended, are U.S. market makers permitted to facilitate divestment from publicly traded securities of Chinese Military-Industrial Complex Companies (CMICs)?
Yes. U.S. market makers, and non-U.S. market makers who employ U.S. persons, are permitted to engage in activities that are necessary to effect divestiture during the during the 365-day periods in which divestment transactions are permitted or that are not otherwise prohibited under E.O. 13959, as amended, including the conversion of American depositary receipts (ADRs) of a CMIC into underlying securities of the CMIC on the foreign exchange where the underlying securities are listed. See FAQ 865 with respect to the permissibility of market intermediaries and other participants engaging in ancillary or intermediary activities that are necessary to effect divestiture of covered securities.
Date Released
June 3, 2021
1) See section II(vii) of Consolidated Comment on the Chinese Military Companies Sanctions Under the EO Issued June 3, 2021 for discussion of the operation of the "divestment carveout."
Query whether activities such as “the conversion of [ADRs] of a CMIC into underlying securities of the CMIC on the foreign exchange where the underlying securities are listed” would be prohibited in the context of U.S. person facilitation of activities between non-U.S. persons that would be prohibited if they were engaged in by a U.S. person. That is how the “facilitation” concept ordinarily works—i.e. one determines whether the activities facilitated would be prohibited if engaged in directly by U.S. persons—but other FAQs issued in connection with this EO suggest that the facilitation concept operates much different in the EO 13959 context than it does in most others....