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Guaranteed IB Requirements

The Form 1 FR-IB Part B is the only acceptable form for a guarantee agreement.

Either party to a guarantee agreement can initiate a termination process by providing written notice of intent to the other party, NFA, the CFTC and the FCM's DSRO, at least 30 days prior to the planned termination date. On the termination date, the IB must cease doing business until it files with NFA either a new guarantee agreement or the required financial reports to become independent.

IBs that switch from guaranteed to independent have a financial filing requirement (either a Form 1-FR-IB or a FOCUS report) which can be met in one of two ways:

1. A financial statement certified by an independent public accountant as of a date not more than 45 days prior to the date on which such report is filed; or

2. A financial statement as of a date not more than 17 business days prior to the date on which such report is filed and a financial statement certified by an independent public accountant as of a date not more than one year prior to the date on which such report is filed.

Guaranteed IBs need to be aware that if their guaranteeing FCM's minimum required adjusted net capital falls below the prescribed early warning level for a specified period of time, the FCM may be forced to terminate their guarantee agreements.

An FCM which enters into a guarantee agreement is, according to Compliance Rule 2-23, jointly and severally subject to discipline for acts and omissions by its guaranteed IB, if that guaranteed IB violates NFA rules.

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