1047. For the purposes of Executive Order (E.O.) 13959, as amended, can holders of Chinese Military-Industrial Complex Companies' (CMIC) securities receive stock splits, cash dividends, or dividend reinvestments related to the covered securities, and are U.S. financial institutions allowed to process transactions related to this activity?
U.S. persons who hold securities of CMICs identified pursuant to E.O. 13959, as amended, may continue to receive cash dividends and stock splits related to such covered securities, and U.S. financial institutions may continue to process such transactions. However, purchases of CMIC securities effected through dividend reinvestments constitute purchases that are prohibited pursuant to E.O. 13959, as amended. U.S. persons may, however, continue to facilitate the distribution of dividend reinvestments for non-U.S. persons after the relevant divestment period.
Released on 06/01/2022
1) This FAQ provides important guidance concerning the notion of a "purchase" of a prohibited security. OFAC confirms that "purchases of CMIC securities effected through dividend reinvestments constitute purchases that are prohibited pursuant to E.O. 13959, as amended." The rest of the FAQ merely confirms what was already evident, i.e. that activities related to CMIC securities are not prohibited provided that they are not the purchase or sale of covered securities (or the facilitation of the purchase or sale). The prohibition covers "purchase or sale," rather than, e.g., all "dealings in" prohibited securities. It is not clear whether OFAC would authorize divestments through specific licenses as a matter of course. One would expect a favorable licensing policy in that regard.