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OFAC Regulation of Portfolio Management and Custody

Friday, January 23, 2015 12:00 PM to 1:00 PM
Boston Bar Association - 16 Beacon Street, Boston, MA


Since 9/11, most asset managers have implemented or enhanced compliance systems and processes to ensure that their investors on the sell side are not targets of U.S. sanctions administered by the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC).  However, until recently, less attention has been paid to ensuring the portfolio investments on the buy side are not prohibited under OFAC sanctions.  In 2014, OFAC implemented the administration’s new Ukraine-related sanctions program, which directly addresses investments in Russian debt and equity by U.S. asset managers. 

Many asset managers remain unaware the extent to which OFAC sanctions may prohibit U.S. investment in issuers that neither appear on any OFAC list nor domiciled in a sanctioned nation.  Although the issues can be complex and investments that implicate the sanctions are uncommon, the stakes for global investment managers could not be higher.  Long or short positions subject to OFAC restrictions can be costly, risky and difficult or impossible to exit legally. 

This brown bag will examine the range of practical questions and challenges associated with the application of economic sanctions law to the activities of fund and separate account portfolio management.  Topics will include: 

  • The different layers of investment prohibitions under the four Directives in the Ukraine-Related Sanctions Regulations;
  • How to apply different types of OFAC country sanctions program to U.S. investment activities;
  • Whether and how sanctions programs can apply to offshore subsidiaries and affiliates of U.S. asset managers;
  • Understanding how the “facilitation” doctrine under the International Emergency Economic Powers Act (IEEPA) can impact investments in securities issued by “third country” companies;
  • How sanctions prohibitions apply differently to secondary exchange and Rule 144A trading, direct private and underwritten public offerings, and debt investments;
  • Risk assessment;
  • Risk-based practices for automated screening and manual investigation of issuers and the parties that own and run them;
  • Distinctions between various categories of transactions prohibitions and property interest blocking;
  • OFAC reporting requirements; and
  • Licensing processes for restricted investments.

Sponsoring Section/Committee(s):




Elizabeth Vincensi


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