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652. Is it permissible for mutual funds and exchange traded funds (collectively, "funds") that are U.S. persons to buy, sell, or otherwise engage in transactions related to debt, equity, or other holdings in an entity that appears on OFAC’s List of Specially Designated Nationals and Blocked Persons (SDN List), or of an entity owned 50 percent or more, individually or in the aggregate, by an individual or entity on the SDN List?
No. A fund that is a U.S. person may not buy, sell, or otherwise engage in transactions related to debt, equity, or other holdings in blocked persons and must block such holdings, unless authorized by OFAC via general or specific license. A U.S. fund that contains such blocked holdings generally is not itself considered a blocked entity, and U.S. persons may continue to invest in the fund and the fund may continue to operate. The...
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Note: this FAQ and comments thereto were posted/written prior to the blocking of the Government of Venezuela pursuant to EO 13884. Neither the FAQ nor the comment have been updated in light of that development.
1) This FAQ is ostensibly about Venezuela, but with obvious cross-programmatic application for all programs operating within the rubric of standard blocking language.
OFAC impliedly makes two statements about the scope of the term "interest," as it relates to "property" in which a blocked person has an "interest."
First, a blocked person has an "interest" in any debt, equity, or other holdings issued or owned by that person, even if such debt is held by a third-party fund.
Second, just because a blocked person's blocked debt is part of a fund, it does not render the entire fund "property" in which...