OFAC Compliance Representation and Warranty

Summary

This representation and warranty clause may be used by an issuer to indicate compliance with sanctions of the Office of Foreign Assets Control (OFAC). OFAC is an agency within the U.S. Department of the Treasury that administers and enforces economic and trade sanctions to advance foreign policy and national security concerns. This clause includes practical guidance and drafting notes. OFAC operates under a number of statutes, including the International Emergency Economic Powers Act and the Trading with the Enemy Act as well as certain United Nations and other international decrees. OFAC sanctions apply to specific nations, regimes, terrorists, and other individuals who engage in activities that threaten economic and national security. A list of current countries, entities, and individuals who are targeted by OFAC can be found on the website of the Department of the Treasury, available at: Sanctions Programs and Country Information. See also OFAC Due Diligence in Securities Offerings and OFAC Compliance in a Securities Offering Checklist. Any violations of OFAC sanctions may result in criminal and civil penalties and attorneys drafting or negotiating underwriting agreements should be mindful of OFAC compliance representations. It has become standard practice for underwriting agreements to include a representation and warranty that: (1) Neither the company nor any of its subsidiaries, directors, officers, or employees is currently subject to any OFAC sanctions. (2) The company will not use the proceeds from the transaction to finance any activities of any person that may be subject to OFAC sanctions. This representation and warranty incorporates both of these assertions. This draft should be customized to the particular facts and circumstances of the company and the underwriting agreement. For a full listing of related due diligence for securities offerings content, see Due Diligence for Securities Offerings Resource Kit. For more on IPOs generally, see Initial Public Offerings Resource Kit.