U.S. Executive Order 13959 – Prohibiting Transactions in Securities of Certain “Communist Chinese military companies”
August 2, 2021
Beginning at 12:01 a.m. eastern standard time (“EST”) on Monday, August 2, 2021 (hereafter, the “Effective Date”), U.S. persons are prohibited from engaging in the purchase or sale of publicly traded securities, or any publicly traded securities that are derivative of such securities, or are designed to provide investment exposure to such securities of Chinese Military-Industrial Complex companies (“CMICs”). The term ‘‘publicly traded securities’’ includes any ‘‘security,’’ as defined in section 3(a)(10) of the Securities Exchange Act of 1934, Public Law 73–291 (as codified as amended at 15 U.S.C. 78c(a)(10)), denominated in any currency that trades on a securities exchange or through the method of trading that is commonly referred to as ‘‘over-the-counter,’’ in any jurisdiction.
In addition, U.S. persons are also prohibited from performing services commonly associated with “intermediary functions” such as execution, clearing, custody, settlement, and back office operations, if those services are provided to a U.S. person in connection with activities prohibited under the Order.
- A CMIC is any person (individual or entity) that is identified and listed as such by the U.S. Treasury Department pursuant to various statutory provisions of U.S. Federal law, or other entity with a name that exactly matches the name of the listed CMIC. Please refer to the current list of Non-SDN Chinese Military-Industrial Complex Companies List.
- The term “U.S. persons” includes U.S. citizens, permanent residents, and U.S. legal entities located outside of the United States, as well as any individuals or entities located in the United States or its territories.
- A “transaction” is defined as “the purchase or sale of publicly traded securities”.
BNP Paribas will implement controls on August 2, 2021 that restrict U.S. Person clients from trading in CMIC Covered Securities other than transactions for the purposes of divesting existing holdings by the end of the permitted divestiture period. Non-U.S. Person clients may generally continue trading in the Covered Securities, except that transactions by non-U.S. Person clients and permitted divestment transactions by U.S. Person clients will both be excluded from straight-through processing and will be suspended until due diligence checks can be performed. If BNP Paribas is able to determine based on information ordinarily available that the transaction is permitted under the Executive Order then the transaction will be released from suspension and allowed to continue to be processed. If BNP Paribas cannot determine that the transaction falls within the permitted scope of the Executive Order, then the transaction will not be processed.
Please note that BNP Paribas clients and counterparties are responsible for ensuring that they comply with applicable provisions of Executive Order 13959, as amended (and any subsequent official guidance).
To continue placing orders (long sell and/or purchase) and/or requesting the clearing and/or settlement of transactions in the Covered Securities with BNP Paribas, please provide express written representations (“Representations”) prior to placing the order and/or requesting clearing and/or settlement of a transaction that the order and/or transaction is solely for divestment purposes and will not result in additional investment exposure to such Covered Securities.
If you place orders and/or request clearing and/or settlement of a transaction with us in the Covered Securities without prior Representations, BNP Paribas reserves the right to take action, as we deem necessary to comply with the provisions of EO 13959, as amended (and any subsequent official guidance).
For the avoidance of doubt, your order will continue to be acknowledged, however completion of such order will be subject to internal controls as required under the Executive Order.
Representations can either be made on an order and/or transaction level or using the attached template which will be subject to regular refresh as and when we deem necessary.
Please reach out to your BNP Paribas relationship manager with any further questions.
Please refer to the following links for additional details:
This communication is provided for informational purposes only and does not purport to constitute legal or regulatory advice. In all cases, recipients should conduct their own investigation and analysis of the information contained in this document and should consult their own professional advisers.