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653. I am the manager of a Synthetic Exchange Traded Fund (ETF), which tracks a basket of debt, equity or other holdings in order to provide a return approximating the returns on that basket, but which does not actually hold the underlying debt, equity, or other holdings contained in the basket. May I continue to offer such funds, and may U.S. persons trade in shares of these funds, if the underlying basket being tracked contains holdings in an entity or entities that appear 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?
Yes, so long as the underlying basket being tracked includes less than a predominant share by value of debt, equity, or other holdings in blocked persons. U.S. and non-U.S....
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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.
First note that, unlike substantively related FAQ 524, this FAQ is issued in connection with EO 13850, a standard blocking executive order.
In FAQ 524, OFAC stated, in a roundabout way, that engaging in derivatives transactions, including credit default swaps, related to a reference bond subject to the prohibitions of EO 13808 is prohibited unless generally licensed. That FAQ did not necessarily say anything about the relationship between derivatives and standard blocking language, however, since...