NFA Proposed Rule: Protection of Customer Funds; Amendments to NFA Financial Requirements Section 4, August 2012

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On August 21, 2012, the National Futures Association (NFA) issued proposed amendments to section 4 of its financial requirements for FCMs to provide online view-only access to customer segregated /secured bank account information. This was in response to the bankruptcy of FCM PFGBest, which, on July 9, 2012 revealed that the firm had been submitting falsified bank statements to auditors from the National Futures Association (NFA), and that approximately $220 million in customer segregated funds had not been accounted for.[1]

Summary of the Proposed Amendments

Under the proposed amendments:

  • Any futures commission merchant (FCM), registered foreign exchange dealer (RFED) or introducing broker (IB) who violates CFTC Regulation 1.49 shall be deemed to have violated NFA rules as well. The amendment adds Reg. 1.49 to a list that includes Regs. 1.10, 1.12, 1.16, 1.17, 1.20-1.30, 5.6, 5.7, and 30.7.
  • Member FCMs must provide its designated self-regulatory organization (DSRO) with view-only full access via the internet to account information.
  • In order to be an acceptable depository to hold customer segregated funds As identified in CFTC Regulations 1.20 and 30.7, the FCM's bank or trust depository must provide the DSRO with view-only access to account information via the internet.
  • FCMs that receive customer money in relation to cleared OTC transactions must comply with the requirements of the CFTC, designated contract market or derivatives clearing organization.

Related Document: Proposed Amendment to NFA Financial Requirements, Section 4

References

  1. Peregrine Financial Group brokerage said to be $220 million short in customer funds. CBS. Retrieved on July 10, 2012.

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