PANDORA’S BOX EVERYTHING GOT OUT. THE HOPE IS AT THE BOTTOM. |
THE ONE-WAY DOOR There is now a map of places American money may not go, and it is getting bigger The first penalty was $200,000 on an investment of about $92,478. Six days ago the Treasury proposed widening the map. |
On December 18 last year a law went through inside the defense bill. It told the Treasury to draw a map of places American money may not go. |
The program itself had already started, on January 2 of last year. |
In July the Treasury fined a company called Amidi $200,000. |
The investment it had failed to report was about $92,478. |
The fine came to more than twice the money that moved. It was made public on October 7. |
| $200K FIRST PENALTY, ON A DEAL OF ABOUT $92,478 | → | The failure was not the investment. It was not telling the Treasury the investment had happened. |
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Six days ago the Treasury proposed widening the map. |
The proposal reached the Federal Register on Monday. Comments close on December 7. |
Two different things are in play here. The law and the first fine are done. The widening is still a proposal. |
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The final version is due by March, under a deadline the statute sets itself. |
Here is what the map covers today, and what it would cover next. |
The program began under an executive order in 2023 and took final form at the start of last year. |
Congress then wrote it into statute. That is what makes the March deadline binding. |
Today it is semiconductors, quantum computing and artificial intelligence, in China, Hong Kong and Macau. |
Three sectors, three places. |
The proposal adds biotechnology, hypersonics and high performance computing. |
Six if the rule is finalised. |
And it adds four more countries. Cuba, Iran, North Korea and Russia. |
Control is defined more widely too. A company can count as covered through contract rights alone, with nobody owning half of it. |
On artificial intelligence the change is sharper than it looks. |
The current rules sort AI deals into two piles, banned and merely reportable. |
The proposal deletes the reportable pile. Anything developing a super intelligence system is banned outright. |
That phrase is not limited to the big models. It reaches applications, agent systems and robotics. |
Two government lists do similar work. |
The Pentagon keeps a public list of companies it ties to the Chinese military. A company on that list turns a reportable deal into a banned one. |
Now the part that touches an ordinary portfolio. |
The exception for publicly traded securities stays in place. |
That is the big one. |
So does the exception for registered investment companies, which is where most ordinary funds sit. |
So what does this cost you today? Directly, nothing. Your fund keeps its exception and nobody files anything in your name. |
The cost sits one step away. The list of places your fund manager may put money gets shorter. And the exception you rely on is the part the final rule can still move. |
Two exceptions go. One covered business development companies, which are listed funds that lend to smaller private firms. |
Below fifty thousand dollars there is an exemption, and it covers the paperwork only. |
If the deal itself is banned, the size of it changes nothing. |
The rules reach the person who arranges a deal, not only the one who funds it. |
Arranging is participating. |
Which is the lesson of the Amidi fine. The money was small and the paperwork was the offence. |
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On quantum computing almost everything covered is already banned, not merely reported. |
Treasury is asking whether some of the biotechnology categories are drawn too wide. |
Three honest limits before you file this away. |
This is a proposal, not a final rule. The sector lists can still narrow before March. |
The fund exceptions mean somebody holding index funds is not the target of any of this. |
And nothing in it reaches a share you already own. |
When a map closes off where capital may go, the argument about where it goes instead gets louder. |
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EVERY LEAD PASSES BEFORE IT RUNS The One-Way-Door Test |
01 | Can it be undone? The statute is law and the first penalty is already paid. Only the width of the list is still open. | |
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02 | Who is already repositioning? Funds with any exposure to those sectors. A notifiable deal has to reach the Treasury within thirty days of closing. | |
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03 | What does being late cost? In the one case so far, more than the deal itself. Amidi paid $200,000 on about $92,478. | |
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THE MOVE · TWO VERSIONS, PICK YOURS If you hold a fund that invests in private companies or in emerging markets, put one question to the manager in writing. Which exception does this fund rely on. If you hold only listed shares and index funds, there is nothing to file and nothing to do today. The thing to watch is the exception list itself, because that is the part the final rule can still move. This is a proposal open for comment until December 7. Sectors and thresholds can change before the final rule, which is due by March. |
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ALSO GOT LOOSE TODAY | The Federal Reserve ends a two day meeting today, with the rate decision due in the afternoon. | MONEY |
| Alphabet and Microsoft report after the close today, with Amazon following tomorrow. | MACHINES |
| Health insurance enrollment on the federal exchange opens on Sunday. | LATER |
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WHAT’S LEFT AT THE BOTTOM The map is about where money may go next, not where it already sits. The share in your account this morning is not on it. WE WATCH THE BOX. |
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