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Further to the ‘Executive Order by the President of the United States of America’ notification published on 13 November 2020, FTSE Russell is inviting comments from market participants on the appropriate treatment of affected constituents of FTSE Russell indexes.
Effective from Monday 11 January 2021, the Executive Order prohibits United States persons from transacting securities investments in any Communist Chinese military company as defined in section 4(a)(i) of the Executive Order. FTSE Russell understands the affected companies to be those listed by the US Department of Defense (link), but has requested the Office of Foreign Assets Control (OFAC) to confirm the scope of the sanctions.
The FTSE Russell Index Policy Guide for its equity indexes, "In the Event Clients are Unable to Trade a Market", section 2.3, “Sanctions are imposed which restrict investment into foreign jurisdictions” states:
“Should sanctions, either primary or secondary, be imposed that prohibit US, UK and or European Union (EU) natural or legal persons from investing in particular countries, industries, named companies or companies linked to sanctioned individuals, FTSE Russell will delete the sanctioned securities from FTSE Russell indexes”.
In the light of the imminence of the effective date of the Executive Order, FTSE Russell is seeking rapid feedback from clients and other stakeholders on the scope of the sanctions and the timing of the deletion of the affected securities from FTSE Russell indexes. Comments are requested to submitted via the link below by the US market close on Friday 27 November 2020. FTSE Russell intends to confirm equity index treatment following the US market close on Friday 04 December 2020.
Please note that the indicative review files for those indexes that are reviewed in December (scheduled to be published from Friday 20 November 2020 for FTSE GEIS indexes) will continue to reflect the sanctioned securities as index constituents. The product files published on and after Monday 7 December 2020 will reflect the confirmed index treatment that will be effective from the open on Monday 21 December 2020.
FTSE Russell is currently reviewing the impact of the Executive Order to its fixed income indexes and will provide an update in due course.
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The consultation will close on Friday 27 November 2020.
Unfortunately, FTSE Russell will not be able to consider responses with incomplete contact details. You will be asked to provide your details at the end of the survey. All responses will be treated as confidential. FTSE Russell may publish a summary of the consultation responses, but no individual response will be published and no respondent will be named.
