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DTCC uncovers 'illegal' Cuban stock certificates

Worth only the paper it’s printed on

Is the DTCC being paranoid? According to some of its members, it plainly is.

The US clearing and settlements corporation rang round its members in March in a panic with a list of securities that fall under the legislation that imposes sanctions on Cuba. These, the DTCC said, had been transacted through several of its members.

The corporate bonds and stock in question, however, had been issued on Cuban companies before the US imposed an economic embargo on its Caribbean neighbour in 1962; in some cases they dated back to the 1920s. All the underlying assets would therefore have been frozen as far as US citizens were concerned.

“We received the serious call from the DTCC saying they had screened all securities and uncovered these illegal transactions, and we just laughed,” says a senior compliance executive at one member bank. He points out the securities in question are traded over the counter as collectors’ items.

“The companies that issued them have no assets. They are being traded as historical souvenirs,” he says. “In some cases, when the companies’ assets were frozen, it was agreed that the owner of stock would receive an interest rate if the US ever lifted sanctions, so some people are trading them in the hope they will one day receive that interest.

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