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Financial Requirements



SECTION 1. FUTURES COMMISSION MERCHANT FINANCIAL REQUIREMENTS.
[Effective dates of amendments: December 17, 1999; October 31, 2000; January 10, 2001; December 31, 2001; September 30, 2004; July 31, 2006; February 13, 2007; October 31, 2008; March 31, 2010; October 18, 2010; and June 30, 2013.]

(a) Each NFA Member that is registered or required to be registered with the Commodity Futures Trading Commission (hereinafter "CFTC") as a Futures Commission Merchant (hereinafter "Member FCM") must maintain "Adjusted Net Capital" (as defined in CFTC Regulation 1.17) equal to or in excess of the greatest of:

    (i) $1,000,000;

    (ii) For Member FCMs with less than $2,000,000 in Adjusted Net Capital, $6,000 for each remote location operated (i.e., proprietary branch offices, main office of each guaranteed IB and branch offices of each guaranteed IB);

    (iii) For Member FCMs with less than $2,000,000 in Adjusted Net Capital, $3,000 for each AP sponsored (including APs sponsored by guaranteed IBs);

    (iv) For securities brokers and dealers, the amount of net capital specified in Rule 15c3-1(a) of the Regulations of the Securities and Exchange Commission (17 CFR 240.15c3-1(a));

    (v) Eight (8) percent of domestic and foreign domiciled customer and non-customer (excluding proprietary) risk maintenance margin/performance bond requirements for all domestic and foreign futures, options on futures contracts and cleared over-the counter derivatives positions excluding the risk margin associated with naked long option positions;

    (vi) For a Member FCM that acts as counterparty to a forex transaction (as forex is defined in Bylaw 1507(b) but excluding the counterparty limitation contained in Bylaw 1507(b)(2)), $20,000,000, except that Forex Dealer Members must meet the requirements in Financial Requirements Section 11.

(b) Each Member FCM for which NFA is the designated self-regulatory organization ("DSRO") must file financial reports with NFA for each month-end, including its fiscal year end, within 17 business days of the date for which the report is prepared. All financial reports must be filed on Form 1-FR-FCM or, if the Member is a broker-dealer, on Form 1-FR-FCM or the FOCUS Report, and all financial reports except those required to be certified by a Certified Public Accountant must be filed electronically using an electronic medium approved by NFA.

(c) A Member FCM for which NFA is the DSRO that is required to file any document with or give any notice to its DSRO under CFTC Regulations 1.10 [Financial reports of futures commission merchants and introducing brokers], 1.12 [Maintenance of minimum financial requirements by futures commission merchants and introducing brokers], 1.16 [Qualifications and reports of accountants], or 1.17 [Minimum financial requirements for futures commission merchants and introducing brokers] or is required to file any financial report or statement (e.g., FOCUS Reports) with any other securities or futures self-regulatory organization of which it is a member shall also file one copy of such document with or give such notice to NFA at its Chicago office no later than the date such document or notice is due to be filed with or given to the CFTC or the self-regulatory organization.

(d) No Member FCM may use forex customer equity as capital or may record forex customer equity as an asset without recording a corresponding liability. For purposes of this requirement:

    (i) Forex customer means any person who is not an eligible contract participant, as defined in Section 1a(12) of the Act, who enters into forex transactions (as defined in Bylaw 1507(b)) with the FCM or any of its affiliates described in section 2(c)(2)(B)(ii)(III); and

    (ii) Forex customer equity means money, securities, and property received by the FCM or any of its affiliates described in section 2(c)(2)(B)(ii)(III) to margin, guarantee, or secure forex transactions between a forex customer and the FCM or any of its affiliates described in section 2(c)(2)(B)(ii)(III) or accruing to a forex customer as a result of such transactions.

[See NFA Financial Requirements for the Electronic Filing of Financial Reports.]



SECTION 2. ELIGIBILITY TO GUARANTEE IBS.
[Effective dates of amendments: December 17, 1999; December 31, 2001; September 30, 2004; December 4, 2006; October 20, 2008; and June 14, 2010.]

(a) A Member FCM, other than a Forex Dealer Member, which knows or should know that its Adjusted Net Capital is less than the greatest of:

    (i) 150% of the amount set forth in NFA Financial Requirements Section 1(a)(i);

    (ii) For Member FCMs with less than $2,000,000 in Adjusted Net Capital, $9,000 for each remote location operated (i.e., proprietary branch offices, main office of each guaranteed IB and branch offices of each guaranteed IB);

    (iii) For Member FCMs with less than $2,000,000 in Adjusted Net Capital, $4,500 for each AP sponsored (including APs sponsored by guaranteed IBs);

    (iv) For securities brokers or dealers, the amount of capital specified in Rule 17(a)-11(b) of the Regulations of the Securities and Exchange Commission (17 CFR 240.17a-11(b)); or

    (v) One hundred and ten (110) percent of the amount required in Financial Requirements Section 1(a)(v)

may not enter into a guarantee agreement with an IB until it files three successive month-end statements where the Member FCM's Adjusted Net Capital is equal to or greater than the amount required by this subsection.

(b) A Forex Dealer Member which knows or should know that its Adjusted Net Capital is less than the amount required by Financial Requirements Section 11 may not enter into a guarantee agreement with an IB until it files three successive month-end statements where the Member FDM's Adjusted Net Capital is equal to or greater than the amount required by Financial Requirements Section 11.

(c) A Member FCM or RFED which is a party to a guarantee agreement with an IB and whose Adjusted Net Capital is less than the amount set forth in paragraph (a) or (b) of this Section, as applicable, must also provide its DSRO, NFA and any IBs which it guarantees with a notice that the FCM's or RFED's Adjusted Net Capital is less than the amount required by paragraph (a) or (b). If the FCM or RFED cannot demonstrate to NFA and its DSRO, within 30 days after filing the required notice, that its Adjusted Net Capital is greater than the amount required by paragraph (a) or (b), the FCM must immediately notify, in writing, any IB which it guarantees that the guarantee agreement will terminate 30 days following the notice. A copy of the notice must also be filed with the CFTC, NFA, and the DSRO of the FCM or RFED. If the FCM or RFED demonstrates to its DSRO and NFA prior to the effective date of the termination of the guarantee agreement that its Adjusted Net Capital is greater than the amount required by paragraph (a) or (b), then it may notify any IB which it guarantees, the CFTC, NFA, and its DSRO, that the guarantee agreement will not terminate.



SECTION 3. RELIEF REQUESTS.
[Effective dates of amendments: December 17, 1999 and October 18, 2010.]

A Member FCM, for which NFA is DSRO, RFED, or IB that may file a request for relief from certain provisions of CFTC Regulations 1.10, 1.12, 1.16, 1.17, 5.6 and 5.7 with its DSRO may file such request with NFA. NFA may grant the relief request without receiving the prior concurrence of the CFTC unless such concurrence is required by CFTC Regulations. Any such grant of relief shall be valid and shall remain in full force and effect unless or until reversed by the CFTC or withdrawn by NFA.



SECTION 4. FINANCIAL REQUIREMENTS AND TREATMENT OF CUSTOMER PROPERTY.
[Effective dates of amendments: December 17, 1999; June 2, 2008; October 4, 2010; October 18, 2010; September 1, 2012; February 15, 2013; and September 6, 2013.]

(a) Any Member FCM, RFED, or IB who violates any of CFTC Regulations 1.10, 1.12, 1.16, 1.17, 1.20 through 1.30, 5.6, 5.7, 30.7 or 22.2 through 22.16 (as applicable) shall be deemed to have violated an NFA Requirement.

(b) Each Member FCM must instruct each depository, as required by NFA, holding customer segregated funds under CFTC Regulation 1.20, customer secured amount funds under CFTC Regulation 30.7 or cleared swaps customer collateral under CFTC Regulation 22.2 to report the balances in the FCM's customer segregated funds, customer secured amount funds and cleared swaps customer collateral accounts to NFA or a third party designated by NFA in the form and manner prescribed by NFA.

(c) In addition to the requirements of CFTC Regulation 1.49(d), in order to be an acceptable depository to hold customer segregated funds accounts identified in CFTC Regulation 1.20, the depository must report the balances in the FCM's customer segregated funds account(s) held at the depository to NFA or a third party designated by NFA in the form and manner prescribed by NFA.

(d) In addition to the requirements of CFTC Regulation 30.7(c), in order to be an acceptable depository to hold customer secured amount accounts identified in CFTC Regulation 30.7, the depository must report balances in the FCM's customer secured amount account(s) held at the depository to NFA or a third party designated by NFA in the form and manner prescribed by NFA.

(e) In addition to the requirements of CFTC Regulation 22.4, in order to be an acceptable depository to hold cleared swaps customer collateral accounts identified in CFTC Regulation 22.2, the depository must report balances in the FCM's cleared swaps customer collateral account(s) held at the depository to NFA or a third party designated by NFA in the form and manner prescribed by NFA.



SECTION 5. INTRODUCING BROKER FINANCIAL REQUIREMENTS.
[Effective dates of amendments: December 17, 1999; December 31, 2001; June 30, 2004; September 30, 2004; July 31, 2006; December 22, 2006; July 18, 2012; and September 30, 2014.]

(a) Each Member IB, except an IB operating pursuant to a guarantee agreement which meets the requirements set forth in CFTC Regulation 1.10(j), must maintain Adjusted Net Capital (as defined in CFTC Regulation 1.17) equal to or in excess of the greatest of:

    (i) $45,000;

    (ii) For Member IBs with less than $1,000,000 in Adjusted Net Capital, $6,000 per office operated by the IB (including the main office);

    (iii) For Member IBs with less than $1,000,000 in Adjusted Net Capital, $3,000 for each AP sponsored by the IB; or

    (iv) For securities brokers and dealers, the amount of net capital required by Rule 15c3-1(a) of the Securities and Exchange Commission (17 CFR 240.15c3-1(a)).

(b)

    (1) Each Member IB, except an IB operating pursuant to a guarantee agreement which meets the requirements set forth in CFTC Regulation 1.10(j), must file financial reports with NFA semi-annually, including its fiscal year end, within 17 business days of the date for which the report is prepared. All financial reports must be filed on Form 1-FR-IB or, if the Member is a broker-dealer, on Form 1-FR-IB or the FOCUS Report, and all financial reports must be filed electronically.

    (2) The Member IB shall electronically file its financial reports by accessing NFA's financial reports database in the manner provided by NFA. Each Member IB shall designate, in the manner provided by NFA, the person or persons authorized to file its financial reports.

    (3) The electronic filing of the Member IB's financial report shall constitute:

      (A) a representation that the person electronically filing the financial report is a person specified in CFTC Regulation 1.10 (d)(4);

      (B) an attestation that the person electronically filing the financial report is duly authorized to bind the Member IB submitting the financial report and representation that, to the best of such person's knowledge, all information contained therein is true, correct and complete;

      (C) an acknowledgement that it is understood that all required items and statements are integral parts of the financial report and that the submission of any amendment represents that all unamended items and statements remain true, correct and complete as previously submitted; and

      (D) an acknowledgement that it is further understood that any intentional misreports or omissions of facts constitute Federal Criminal Violations (see 18 U.S.C. 1001).

    (4)

      (A) No Member IB may access NFA's electronic financial reports database until NFA has assigned it a unique identifying code and password;

      (B) Each Member IB is responsible for maintaining the security and confidentiality of its identifying code and password and those of the persons whom it authorizes to make electronic financial report filings on its behalf. NFA's electronic financial reports database shall record and store the identifying code of each person accessing NFA's database and shall logically associate in the database such identifying code with any electronic filing made by the person using such identifying code. The person whose identifying code is used to make an electronic filing will be deemed to have made such filing;

      (C) Each Member IB shall make available any person it has authorized to make or actually performing duties related to electronic filings, for testimony in court or before the Commission, NFA or any contract market regarding the authentication, integrity or accuracy of any electronic filing; and

      (D) The ability to electronically access NFA's financial reports database is a privilege and not a right. NFA may disable any person's identifying code and password and terminate the person's ability to access the database at any time, without notice or a hearing, in NFA's sole discretion, if NFA believes that the person has not complied with this Financial Requirements Section 5 or any procedures that NFA establishes to implement this Financial Requirements Section 5.

(c) A Member IB that is required to file any document with or give any notice to the CFTC under CFTC Regulations 1.10 [Financial reports of futures commission merchants and introducing brokers], 1.12 [Maintenance of minimum financial requirements by futures commission merchants and introducing brokers], 1.16 [Qualifications and reports of accountants], or 1.17 [Minimum financial requirements for futures commission merchants and introducing brokers] or is required to file any financial report or statement (e.g., FOCUS Reports) with any other securities or futures self-regulatory organization of which it is a member shall also file one copy of such document with or give such notice to NFA at its Chicago office no later than the date such document or notice is due to be filed with or given to the CFTC or the self-regulatory organization.

[See NFA Financial Requirements for the Electronic Filing of Financial Reports.]



SECTION 6. LEVERAGE TRANSACTION MERCHANT FINANCIAL AND REPORTING REQUIREMENTS.
[Effective dates of amendments: December 17, 1999 and October 3, 2011.]

(a) Each Leverage Transaction Merchant (hereinafter “Member LTM") must maintain "Adjusted Net Capital" (as defined in CFTC Regulation 1.17) equal to or in excess of the greatest of:

    (i) $20,000,000;

    (ii) the amount required by subsection (a)(i) above plus 5% of all liabilities owed to leverage customers (as leverage customer is defined in CFTC Regulation 31.4) exceeding $10,000,000; or

    (iii) for Member LTMs registered in another capacity, any other amount required by these Financial Requirements.

(b) Each Member LTM required to file any document with or give notice to the CFTC under CFTC Regulations 31.7 [Maintenance of minimum financial, cover and segregation requirements by leverage transaction merchants], 31.13 [Financial reports of leverage transaction merchants], 31.16 [Monthly reporting requirements], and 31.26 [Quarterly reporting requirements] shall also file one copy of such document with or give such notice to NFA at its Chicago office no later than the date such document or notice is due to be filed with or given to the CFTC.



SECTION 7. PERFORMANCE MARGIN.
[Effective dates of amendments: December 17, 1999.]

Every Member FCM that is not a member of a contract market or a foreign board of trade must collect performance margin (initial and maintenance) for all customer accounts at a level no less than that established for customer accounts by the rules of the applicable contract market or a foreign board of trade.



SECTION 8. INFORMATION REQUESTS.
[Effective dates of amendments: December 17, 1999, October 18, 2010 and March 21, 2014.]

(a) If requested by NFA, a Member FCM, RFED, or IB must promptly submit such additional reports and supplemental financial information which NFA deems necessary.

(b) Each FCM for which NFA is the DSRO and each FDM must file the financial, operational, risk management and other information required by NFA in the form and manner prescribed by NFA.



SECTION 9. NOTIFICATION OF REPORTABLE POSITIONS.
[Effective dates of amendments: December 17, 1999.]

Each Member FCM for which NFA is the DSRO and which is required to file any document with or give notice to the CFTC under CFTC Regulation 15.03 shall also file one copy of such document with or give such notice to NFA at its Chicago office no later than the date such document or notice is due to be filed with or given to the CFTC.



SECTION 10. LATE FINANCIAL REPORTS.
[Adopted Effective July 1, 2003. Effective dates of amendments: October 18, 2010; and December 2, 2013.]

Each financial report required by Section 1, 5, 6, or 11 that is filed after it is due shall be accompanied by a fee of $1,000 for each business day it is late. Payment and acceptance of the fee does not preclude NFA from filing a disciplinary action under the Compliance Rules for failure to comply with the deadlines imposed by NFA Financial Requirements or CFTC rules.



SECTION 11. FOREX DEALER MEMBER FINANCIAL REQUIREMENTS.
[Adopted Effective December 1, 2003. Effective dates of amendments: June 6, 2004; November 30, 2005; July 31, 2006; August 9, 2006; February 13, 2007; March 31, 2007; May 7, 2007; December 17, 2007; December 21, 2007; October 31, 2008; November 30, 2009; October 1, 2010; October 18, 2010; and February 1, 2011.]

(a) Each Forex Dealer Member must maintain "Adjusted Net Capital" (as defined in CFTC Regulation 5.7) equal to or in excess of the greatest of:

    (i) $20,000,000;

    (ii) the amount required by subsection (a)(i) above plus 5% of all liabilities owed to customers (as customer is defined in Compliance Rule 2-36(m)) exceeding $10,000,000; or

    (iii) For FCMs, any other amount required by Section 1 of these Financial Requirements.

(b) A Forex Dealer Member may not include assets held by an affiliate (unless approved by NFA) or an unregulated person in its current assets for purposes of determining its adjusted net capital under CFTC Regulation 5.7. An affiliate is any person that controls, is controlled by, or is under common control with the Forex Dealer Member.

For purposes of this section and section (c), a person is unregulated unless it is:

    (i) a bank or trust company regulated by a U.S. banking regulator;

    (ii) a broker-dealer registered with the U.S. Securities and Exchange Commission and a member of the Financial Industry Regulatory Authority;

    (iii) a futures commission merchant registered with the U.S. Commodity Futures Trading Commission and a Member of NFA;

    (iv) a retail foreign exchange dealer registered with the U.S. Commodity Futures Trading Commission and a Member of NFA;

    (v) a bank or trust company regulated in a money center country which has in excess of $1 billion in regulatory capital; or

    (vi) any other entity approved by NFA.

(c) A Forex Dealer Member may not use an affiliate (unless approved by NFA) or an unregulated person, as defined in section (b), to cover its currency positions for purposes of CFTC Regulation 5.7(b)(2)(v)(A).

(d) An FDM for which NFA is the DSRO that is required to file any document with or give any notice to its DSRO under CFTC Regulations 5.6 [Maintenance of minimum financial requirements by retail foreign exchange dealers and futures commission merchants offering or engaging in retail forex transactions], 5.7 [ Minimum financial requirements for retail foreign exchange dealers and future commission merchants offering or engaging in retail forex transactions] and 5.12 [Financial reports of retail foreign exchange dealers], or is required to file any financial report or statement with any other securities or futures self-regulatory organization of which it is a member shall also file one copy of such document with or give such notice to NFA at its Chicago office no later than the date such document or notice is due to be filed with or given to the CFTC or the self-regulatory organization.

(e) For purposes of this rule:

    (1) "Forex" has the same meaning as in Bylaw 1507(b);

    (2) "Forex Dealer Member" has the same meaning as in Bylaw 306; and

    (3) As used in section (c), "currency" refers to open foreign currency positions with counterparties regardless of whether those counterparties are eligible contract participants as defined in Section 1a(12) of the Act.



SECTION 12. SECURITY DEPOSITS FOR FOREX TRANSACTIONS WITH FOREX DEALER MEMBERS.
[Adopted Effective December 1, 2003. Effective dates of amendments: June 6, 2004; September 15, 2005; February 13, 2007; May 14, 2008; October 31, 2008; November 30, 2009; and October 18, 2010.]

(a) Each Forex Dealer Member shall collect and maintain the following minimum security deposit for each forex transaction between the Forex Dealer Member and a person that is not an eligible contract participant as defined in Section 1a(12) of the Act:

    (i) 2% of the notional value of transactions in the British pound, the Swiss franc, the Canadian dollar, the Japanese yen, the Euro, the Australian dollar, the New Zealand dollar, the Swedish krona, the Norwegian krone, and the Danish krone;

    (ii) 5% of the notional value of other transactions;

    (iii) for short options, the above amount plus the premium received; and

    (iv) for long options, the entire premium.

(b) The Executive Committee may temporarily increase these requirements under extraordinary market conditions.

(c) For purposes of this rule:

    (1) "Forex" has the same meaning as in Bylaw 1507(b); and

    (2) "Forex Dealer Member" has the same meaning as in Bylaw 306.

(d) In addition to cash, a Forex Dealer Member may accept those instruments described in CFTC Rule 1.25 as collateral for customers' security deposit obligations. The collateral must be in the FDM's possession and control and is subject to the haircuts in CFTC Rule 1.17.

(e) An FDM is required to collect additional security deposits from a retail forex customer, or liquidate the retail forex customer’s positions, if the amount of the retail forex customer’s security deposits maintained with the FDM is not sufficient to meet the requirements of this section.



SECTION 13. FOREX DEALER MEMBER REPORTS.
[Adopted Effective July 25, 2006. Effective dates of amendments: April 1, 2009; January 2, 2012; September 25, 2012; and December 2, 2013.]

(a) Each Forex Dealer Member must file electronically the following reports with NFA within the specified time periods in a form and manner prescribed by NFA:

    (1) Daily electronic reports showing liabilities to customers and any other financial or operational information required by NFA. The report must be prepared each business day and must be filed by noon on the following business day.

    (2) Monthly operational and risk management reports. These reports must be filed within seventeen business days after the end of each month for which the report is prepared.

    (3) Quarterly reports containing the most updated performance disclosures required by CFTC Regulation 5.5(e)(1)(i) - (iii). These reports must be filed within seventeen business days after the end of each quarter for which the report is prepared.

(b) No Forex Dealer Member may access NFA's electronic financial reports database until NFA has assigned it a unique identifying code and password. Each Forex Dealer Member is responsible for maintaining the security and confidentiality of its identifying code and password and that of each person it authorizes to file electronic reports on its behalf.

(c) Submitting any of these reports certifies that the person filing it is a supervisory employee that is, or is under the ultimate supervision of, a listed principal who is also an NFA Associate; that the person filing it is duly authorized to bind the Forex Dealer Member; and that, to the best of that person's knowledge, all information in the report is true, correct, and complete.

(d) Any report that is filed after it is due shall be accompanied by a fee of $1,000 for each business day it is late. Payment and acceptance of the fee does not preclude NFA from filing a disciplinary action for failure to comply with the deadlines imposed by this rule.



SECTION 14. ASSETS COVERING LIABILITIES TO RETAIL FOREX CUSTOMERS.
[Adopted Effective July 1, 2007. Effective dates of amendments: December 17, 2007; February 1, 2011; July 26, 2012; and October 15, 2014.]

(a) Each Forex Dealer Member shall calculate the amount owed to customers for forex transactions and shall hold assets equal to or in excess of that amount at one or more qualifying institutions in the United States or money center countries (as defined in CFTC Regulation 1.49).

(b) The amount owed to customers shall be calculated by adding up the net liquidating values of each forex account that liquidates to a positive number, using the fair market value for each asset other than open positions and the current market value for open positions.

(c) For assets held in the United States, a qualifying institution is:

    (i) a bank or trust company regulated by a U.S. banking regulator;

    (ii) a broker-dealer registered with the U.S. Securities and Exchange Commission and a member of the Financial Industry Regulatory Authority; or

    (iii) a futures commission merchant registered with the U.S. Commodity Futures Trading Commission and a Member of NFA.

(d) For assets held in a money center country as defined in CFTC Regulation 1.49, a qualifying institution is:

    (i) a bank or trust company regulated in the money center country which has in excess of $1 billion in regulatory capital; or

    (ii) a futures commission merchant registered with the U.S. Commodity Futures Trading Commission and a Member of NFA.

(e) Assets held in a money center country are not eligible to meet the requirements of this rule unless the Forex Dealer Member and the qualifying institution have entered into an agreement, acceptable to NFA, authorizing the institution to provide NFA and the CFTC with information regarding the Forex Dealer Member's accounts and to provide that information directly to NFA or the CFTC upon their request. The Forex Dealer Member must file the signed agreement with NFA.

(f) Each Forex Dealer Member must instruct each qualifying institution, as required by NFA, holding assets used to cover the Forex Dealer Member's liabilities to its retail forex customers under subsection (a), to report the balances in the Forex Dealer Member's account(s) to NFA or a third party designated by NFA in the form and manner prescribed by NFA.

(g) In addition to the requirements of subsections (c), (d) and (e), in order to be an acceptable qualifying institution to hold assets used to cover a Forex Dealer Member's liabilities to its retail forex customers identified in subsection (a), the qualifying institution must report the balances in the Forex Dealer Member's account(s) held at the qualifying institution to NFA or a third party designated by NFA in the form and manner prescribed by NFA.



SECTION 15. FOREX DEALER MEMBER INTERNAL FINANCIAL CONTROLS.
[Adopted Effective September 21, 2007. Effective dates of amendments: December 17, 2009.]

(a) No Member may act as a Forex Dealer Member (as defined in Bylaw 306) unless it has demonstrated to NFA that the Member has adequate internal financial controls. The Forex Dealer Member must demonstrate that its system of internal controls provides reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Forex Dealer Member must also demonstrate that its system of internal financial controls has no material weaknesses and that it is adequate for establishing and maintaining internal controls over financial reporting by the Member. A Forex Dealer Member may satisfy this obligation by obtaining an internal control report that is prepared and certified by an independent public accountant who is registered under Section 102 of the Sarbanes-Oxley Act. The internal control report shall contain, at a minimum, a detailed explanation of the examination performed by the accountant and a representation by the accountant that it has examined and tested the Forex Dealer Member's system of internal controls and that the controls comply with the above standards.

If NFA believes that a Member's internal controls are inadequate at any time, NFA's Compliance Director may require it to provide to NFA an internal control report that is prepared and certified by an independent public accountant who is registered under Section 102 of the Sarbanes-Oxley Act. The internal control report shall meet the above standards.

(b) Provided NFA's Compliance Director believes that a Forex Dealer Member's financial records are inadequate, the Compliance Director may require a Forex Dealer Member's annual certified financial statements to be prepared by an independent public accountant who is registered under Section 102 of the Sarbanes-Oxley Act.

(c) The individuals who prepare the Forex Dealer Member's financial books and records must be under the ultimate supervision of a listed principal and registered associated person of the Member. This principal must also be responsible for researching and selecting the independent public accountant that certifies the firm's annual financial statements.



SECTION 16. FCM FINANCIAL PRACTICES AND EXCESS SEGREGATED FUNDS/SECURED AMOUNT/CLEARED SWAPS CUSTOMER COLLATERAL DISBURSEMENTS.
[Adopted Effective September 1, 2012. Effective dates of amendments: July 1, 2013.]

(a) Each Member FCM must maintain written policies and procedures regarding the maintenance of the FCM's residual interest in its customer segregated funds account(s) as identified in CFTC Regulation 1.20, in its foreign futures and foreign options customer secured amount funds account(s) as identified in CFTC Regulation 30.7 and in its cleared swaps customer collateral account(s) as identified in CFTC Regulation 22.2. The written policies and procedures must target amounts (either by percentage or dollars) that the FCM seeks to maintain as its residual interest in customer segregated funds, in its foreign futures and foreign options customer secured amount funds and in its cleared swaps customer collateral and be designed to reasonably ensure the FCM maintains these target amounts. The FCM's Board of Directors or similar governing body, Chief Executive Officer (CEO) or Chief Financial Officer (CFO) must approve in writing the FCM's targeted residual amount, any change(s) thereto, and any material change(s) in the FCM's written policies and procedures regarding the maintenance of the FCM's residual interest in either the customer segregated funds account(s), the foreign futures and foreign options customer secured amount funds account(s), or the cleared swaps customer collateral accounts.

(b) No Member FCM via a single or multiple transaction(s) may withdraw, transfer or otherwise disburse funds (disbursement) from any customer segregated funds account(s) as identified under CFTC Regulation 1.20 that exceed twenty-five percent (25%) of the FCM's residual interest in customer segregated funds based upon the most current daily segregated funds calculation performed pursuant to CFTC Regulation 1.32 unless:

    (i) The FCM's CEO, CFO or other designated individual(s) who holds a position with knowledge of the FCM's financial requirements and financial position and is listed as a principal on the firm's Form 7-R (for purposes of this Section only, a "Financial Principal") pre-approves in writing the segregated funds disbursement whereby the FCM exceeds or will exceed the twenty-five percent (25%) threshold referred to in (b) above; and

    (ii) The FCM files written notice signed by the FCM's CEO, CFO or Financial Principal in the form and manner prescribed by NFA immediately after the FCM's CEO, CFO or Financial Principal pre-approves in writing the disbursement whereby the FCM exceeds or will exceed the twenty-five percent (25%) threshold referred to in (b) above, which includes the following:

      (1) Notification that the FCM has made or intends to make a disbursement(s) from segregated funds that exceeds or will exceed twenty-five percent (25%) of the FCM's residual interest in customer segregated funds based upon the most current daily segregated funds calculation performed pursuant to CFTC Regulation 1.32;

      (2) A description of the reason(s) for, the amount and recipients of the single or multiple transaction(s) that results or will result in the disbursement(s) that exceeds the twenty-five percent (25%) threshold;

      (3) Confirmation that the FCM's CEO, CFO or Financial Principal (and the identity of that person if different from the person who signed the notice) pre-approved in writing the disbursement whereby the FCM exceeds or will exceed the twenty-five percent (25%) threshold; and

      (4) The current estimate of the FCM's remaining total residual interest in the customer segregated funds account(s) after the disbursement, and a representation that to the best of the person's (i.e., notice signatory's) knowledge and reasonable belief the FCM remains in compliance with the segregation requirements after the disbursement.

    (iii) In calculating whether an FCM has exceeded or will exceed the twenty-five percent (25%) threshold, an FCM shall exclude any segregated funds disbursement(s) that is made to or for the benefit of commodity and option customers.

    (iv) After making a disbursement that requires the approval and notice filing described in subsections (b)(i) and (b)(ii) above, and until such time that the FCM completes its next daily segregated funds calculation required by CFTC Regulation 1.32, no Member FCM may make any subsequent disbursement(s) in any amount from any customer segregated funds accounts (except to or for the benefit of commodity and option customers) without for each disbursement obtaining the approval required in subsection (b)(i) and filing a written notice signed by the CEO, CFO or Financial Principal that discloses the amount and recipient(s) of the disbursement and the reason(s) for the disbursement, confirming that the CEO, CFO or Financial Principal (and the identity of that person if different from the person who signed the notice) pre-approved the disbursement in writing, indicating the current estimate of the FCM's remaining total residual interest in the customer segregated funds account(s) after the disbursement, and containing a representation that to the best of the person's (i.e., notice signatory's) knowledge and reasonable belief the FCM remains in compliance with the segregation requirements after the disbursement.

(c) No Member FCM via a single or multiple transaction(s) may withdraw, transfer or otherwise disburse funds (disbursement) from foreign futures and foreign options customer secured amount funds account(s) as identified under CFTC Regulation 30.7 that exceed twenty-five percent (25%) of the FCM's residual interest in foreign futures and foreign option customer secured amount funds based upon the most current daily secured amount funds calculation performed pursuant to CFTC Regulation 30.7 unless:

    (i) The FCM's CEO, CFO or Financial Principal pre-approves in writing the secured amount funds disbursement whereby the FCM exceeds or will exceed the twenty-five percent (25%) threshold referred to in (c) above; and

    (ii) The FCM files written notice signed by the FCM's CEO, CFO or Financial Principal in the form and manner prescribed by NFA immediately after the FCM's CEO, CFO or Financial Principal pre-approves in writing the disbursement whereby the FCM exceeds or will exceed the twenty-five percent (25%) threshold referred to in (c) above, which includes the following:

      (1) Notification that the FCM has made or intends to make a disbursement(s) from secured amount funds that exceeds or will exceed twenty-five percent (25%) of the FCM's residual interest in secured amount funds based upon the most current daily secured amount funds calculation performed pursuant to CFTC Regulation 30.7;

      (2) A description of the reason(s) for, amounts and recipients of the single or multiple transaction(s) that results or will result in the disbursement(s) that exceeds the twenty-five percent (25%) threshold;

      (3) Confirmation that the FCM's CEO, CFO or Financial Principal (and the identity of that person if different from the person who signed the notice) pre-approved in writing the disbursement whereby the FCM exceeds or will exceed the twenty-five percent (25%) threshold; and

      (4) The current estimate of the FCM's remaining total residual interest in the secured amount funds account(s) after the disbursement, and a representation that to the best of the person's (i.e., notice signatory's) knowledge and reasonable belief the FCM remains in compliance with the secured amount requirements after the disbursement.

    (iii) In calculating whether an FCM has exceeded or will exceed the twenty-five percent (25%) threshold, an FCM shall exclude any secured amount funds disbursement(s) that is made to or for the benefit of foreign futures and foreign options customers.

    (iv) After making a disbursement that requires the approval and notice described in subsections (c)(i) and (c)(ii) above, and until such time that the FCM completes its next daily secured amount funds calculation required by CFTC Regulation 30.7, no Member FCM may make any subsequent disbursement(s) in any amount from any customer secured amount funds accounts (except to or for the benefit of foreign futures and foreign option customers) without for each disbursement obtaining the approval required in subsection (c)(i) and filing a written notice signed by the CEO, CFO or Financial Principal that discloses the amount and recipient(s) of the disbursement and the reason(s) for the disbursement, confirming that the CEO, CFO or Financial Principal (and the identity of that person if different from the person who signed the notice) pre-approved the disbursement in writing, indicating the current estimate of the FCM's remaining total residual interest in the customer secured amount funds account(s) after the disbursement, and containing a representation that to the best of the person's (i.e., notice signatory's) knowledge and reasonable belief the FCM remains in compliance with the secured amount requirements after the disbursement.

(d) No Member FCM via a single or multiple transaction(s) may withdraw, transfer or otherwise disburse collateral (disbursement) from any cleared swaps customer collateral account(s) as identified under CFTC Regulation 22.2 that exceed twenty-five percent (25%) of the FCM's residual interest in the cleared swaps customer collateral based upon the most current daily cleared swaps customer collateral calculation performed pursuant to CFTC Regulation 22.2(g) unless:

    (i) The FCM's CEO, CFO or other designated individual(s) who holds a position with knowledge of the FCM's financial requirements and financial position and is listed as a principal on the firm's Form 7-R (for purposes of this Section only, a "Financial Principal") pre-approves in writing the cleared swaps customer collateral disbursement whereby the FCM exceeds or will exceed the twenty-five percent (25%) threshold referred to in (d) above; and

    (ii) The FCM files written notice signed by the FCM's CEO, CFO or Financial Principal in the form and manner prescribed by NFA immediately after the FCM's CEO, CFO or Financial Principal pre-approves in writing the disbursement whereby the FCM exceeds or will exceed the twenty-five percent (25%) threshold referred to in (d) above, which includes the following:

      (1) Notification that the FCM has made or intends to make a disbursement(s) from cleared swaps customer collateral that exceeds or will exceed twenty-five percent (25%) of the FCM's residual interest in cleared swaps customer collateral based upon the most current daily cleared swaps customer collateral calculation performed pursuant to CFTC Regulation 22.2(g);

      (2) A description of the reason(s) for, the amount and recipients of the single or multiple transaction(s) that results or will result in the disbursement(s) that exceeds the twenty-five percent (25%) threshold;

      (3) Confirmation that the FCM's CEO, CFO or Financial Principal (and the identity of that person if different from the person who signed the notice) pre-approved in writing the disbursement whereby the FCM exceeds or will exceed the twenty-five percent (25%) threshold; and

      (4) The current estimate of the FCM's remaining total residual interest in the cleared swaps customer collateral account(s) after the disbursement, and a representation that to the best of the person's (i.e. notice signatory's) knowledge and reasonable belief the FCM remains in compliance with the cleared swaps customer collateral requirements after the disbursement.

    (iii) In calculating whether an FCM has exceeded or will exceed the twenty-five percent (25%) threshold, an FCM shall exclude any cleared swap customer collateral disbursement(s) that is made to or for the benefit of cleared swap collateral customers.

    (iv) After making a disbursement that requires the approval and notice filing described in subsections (b)(i) and (b)(ii) above, and until such time that the FCM completes its next daily cleared swaps customer collateral calculation required by CFTC Regulation 22.2(g), no Member FCM may make any subsequent disbursement(s) in any amount from any cleared swaps customer accounts (except to or for the benefit of cleared swap customer collateral customers) without for each disbursement obtaining the approval required in subsection (b)(i) and filing a written notice signed by the CEO, CFO or Financial Principal that discloses the amount and recipient(s) of the disbursement and the reason(s) for the disbursement, confirming that the CEO, CFO or Financial Principal (and the identity of that person if different from the person who signed the notice) pre-approved the disbursement in writing, indicating the current estimate of the FCM's remaining total residual interest in the cleared swaps customer collateral account(s) after the disbursement, and containing a representation that to the best of the person's (i.e., notice signatory's) knowledge and reasonable belief the FCM remains in compliance with the cleared swaps customer collateral requirements after the disbursement.

(e) Each Member FCM must report the following financial and operational information to NFA in the form and manner prescribed by NFA and in accordance with the respective time periods specified:

    (i) On a monthly basis, within 17 business days after the end of each month, the following information as of the close of business on the last business day of the month:

      (1) Adjusted net capital, minimum net capital, and excess net capital (listed in U.S. dollar figures);

      (2) Whether any depository used to hold customer segregated funds, foreign futures and foreign options customer secured amount funds or cleared swaps customer collateral during the month is an affiliate of the FCM; and

      (3) The firm's measure of leverage (i.e., total balance sheet assets, less any instruments guaranteed by the U.S. government and held as an asset or to collateralize an asset (e.g., a reverse repo) divided by total capital (the sum of stockholder’s equity and subordinated debt)) all computed in accordance with U.S. GAAP.

    (ii) By 11:59 P.M. Eastern time on the business day following the 15th and the last business day of each month, the following information as of the close of business on the 15th (or the following business day if the 15th falls on a weekend) and the last business day of each month:

      (1) The dollar amount of customer segregated funds held in cash and each type of permitted investments identified in CFTC Regulation 1.25(a);

      (2) The identity of each depository holding customer segregated funds and the dollar amount held at each depository;

      (3) The dollar amount of foreign futures and foreign options customer secured amount funds held in cash and each type of permitted investments identified in CFTC Regulation 1.25(a);

      (4) The identity of each depository holding foreign futures and foreign options customer secured amount funds and the dollar amount held at each depository;

      (5) The dollar amount of cleared swaps customer collateral held in cash and each type of permitted investments identified in CFTC Regulation 1.25(a); and

      (6) The identity of each depository holding cleared swaps customer collateral and the dollar amount held at each depository.

    (iii) By noon of each business day, the daily segregated funds computation, the daily secured amount funds computation and the daily cleared swaps customer collateral calculation as of the close of the preceding business day.

    (iv) The FCM's CEO, CFO or other individual designated by the CEO or CFO to file on his/her behalf, or where applicable, a person described in CFTC Regulation 1.10(d)(4)(ii), must submit the information required by subsections (i)-(iii) above, and by submitting the information the CEO or CFO certifies that to the best of his/her knowledge and belief the information is true, correct and complete.

    (v) Any information filed after its due date shall be accompanied by a fee of $1,000 for each business day that it is late. Payment and acceptance of the fee does not preclude NFA from filing a disciplinary action under the Compliance Rules for failure to comply with the deadlines imposed by NFA Financial Requirements.

 
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