On November 5 2008, the US Treasury Department's Office of Foreign Asset Control (Ofac) issued guidelines to US securities and futures firms for evaluating new clients and investments or transactions by such clients. All securities and futures firms such as investment advisers, broker-dealers, futures commission merchants, introducing brokers in commodities, commodity pool operators and commodity trading advisers in the US (including their overseas subsidiaries and branches) must now establish and maintain an effective Ofac compliance programme.
Although targeted at its domestic industry, these guidelines threaten to have far-reaching extra-territorial ramifications, extending to all foreign counterparties that deal with the US capital markets. Foreign counterparties will now be indirectly subject to US regulations and disclosure obligations, which may cause them to be in breach of their own domestic laws on privacy and banking secrecy. Also, the guidelines hint at the possibility that the foreign counterparty may also be held liable for...