How Navigating Sanctions Can Trip Up Investors: QuickTake Q&A

Among the many changes Donald Trump has brought to the White House is a more combative approach toward punishing what the U.S. sees as outlaw nations. The president has approved fresh congressional sanctions on Russia, Iran and North Korea, imposed his own additional embargoes on Venezuela and delayed efforts begun under the Obama administration to lift sanctions on Sudan. These developments can be dizzying for traders looking to pounce on riskier securities, such as assets from a previously sanctioned nation or one under threat of sanctions. Keep in mind: Sanctions come in many different shapes, sizes and flavors.

One way to think of them is as comprehensive, partial, personal, sectoral or secondary. Comprehensive U.S. sanctions, the most serious kind, currently restrict trading in Crimea, Cuba, Iran, North Korea, Sudan and Syria. A company that provides substantial help to an entity under sanctions may be placed under secondary sanction. An example of a sectoral sanction is one created in 2014 to ban selling dollar-denominated bonds that mature in 30 days or more to Russian banks. The Office of Foreign Assets Control, part of the U.S. Treasury Department, oversees enforcement of sanctions. U.S. residents, entities and their affiliates are prohibited from trading securities with people, companies and countries that are under sanctions.