Customer Protection Regulation - Comment Letter - CFA Institute - February 13, 2013

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Timeline, Enhanced Customer Protections, CFTC
Proposal Date Comment Deadline Final Rule Approved Effective Date
November 14, 2012 February 15, 2012 October 30, 2013 January 13, 2014

Enhancing Protections Afforded Customers and Customer Funds Held by FCMs and DCOs
February 13, 2013

Key points from the comment letter:

  • "Given the proven problems and conflicts banks have had using internal models for determination of capital in recent years, we strongly oppose letting FCMs use internal models for calculating their own capital requirements.
  • While we recognize that the events surrounding MF Global’s illegal confiscation of client funds is a rare breach of Commodity Exchange Act rules, we believe these events highlight a significant weakness that, unless closed could lead to further customer losses and loss of investor trust. Therefore, we support requirements that customer accounts remain segregated from FCM proprietary accounts, and that individuals illegally engaged in violation of these laws are held criminally accountable.
  • FCMs should be held responsible for covering losses occurring from their investment of customer accounts.
  • FCMs should have to disclose critical information about such matters as the ability of FCMs to commingle customer funds in one or more accounts, including accounts provided by affiliates of the FCM, and that in the event of an FCM’s bankruptcy that such funds are not guaranteed by a clearing entity.
  • Protections and requirements for foreign customers of FCMs should be as strong as those for domestic customers."

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