Under Trump Order, SEC Warns of Investments in Chinese Military Companies

By Melanie Waddell

News January 06, 2021 at 12:18 PM

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The Securities and Exchange Commission Wednesday warned advisors and broker-dealers of compliance with the executive order issued by President Donald Trump on investments in securities associated with so-called Communist Chinese military companies, as well as investors transacting in such securities.

The Risk Alert, issued by the Division of Examinations, cites Executive Order 13959, "Addressing the Threat from Securities Investments that Finance Communist Chinese Military Companies," issued by Trump on Nov. 12. (The term originates from the National Defense Authorization Act of 1999, which defined CCMCs but created no legal consequences for being one.)

The Wall Street Journal reported Wednesday that the New York Stock Exchange will move forward with delisting three Chinese telecommunications companies targeted by the Trump executive order.

Beginning on Jan. 11, the order states, U.S. persons, which includes both individuals and entities, will be prohibited from transacting in certain securities and derivatives of Communist Chinese military companies, unless such transactions are for purposes of divestment and occur through Nov. 11, 2021.

The Treasury Department's Office Foreign Asset Control published guidance concerning the EO on several occasions.

"We encourage firms to review and assess the impact of the EO, for their own investments as well as on behalf of investors and clients, and to evaluate their related processes," the SEC risk alert states. "We also encourage firms to continue to review OFAC's website for additional guidance."

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