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March 28, 2007
Effective Date of Interpretive Notice NFA Compliance Rule 2-4: Disclosure Guidelines for FCMs Offering Sweep Accounts
NFA has received notice that the Commodity Futures Trading Commission has approved a new Interpretive Notice to NFA Compliance Rule 2-4 regarding disclosure guidelines for FCMs offering sweep accounts. This Interpretive Notice, which applies only to FCMs, will become effective on July 1, 2007.
This Interpretive Notice applies certain disclosure guidelines to FCM offered sweep account programs that manage cash balances. Specifically, these sweep account programs transfer a customer's excess funds from a regulated commodity account to an account for the customer at the FCM, an affiliate of the FCM, or another entity so that the customer can obtain a higher investment return than maintaining the funds in the FCM's customer regulated commodity accounts.
The Notice applies only to sweep account programs offered or regularly recommended by an FCM. If a customer elects on its own to transfer funds to a particular sweep account program that is not offered by the FCM, then the FCM does not have any disclosure obligations pursuant to this Notice. Additionally, the disclosure guidelines are inapplicable to transfers made pursuant to an FCM's customer agreement's provisions whereby a customer authorizes the transfer of funds from a regulated commodity account to any other account maintained by the customer at the FCM or one of its affiliates when necessary to avoid a margin call or to reduce the debit balance in the other account, or to satisfy any other obligation to the FCM or its affiliates.
The specific disclosure guidelines for FCMs offering sweep accounts are contained in NFA's electronic Manual, which is located at http://www.nfa.futures.org/nfaManual/manualInterp.asp#59. The Notice recognizes, however, that FCMs offering these sweep programs may have to modify these guidelines to address their particular programs. NFA's February 26, 2007, submission letter to the CFTC contains a more detailed explanation of the changes and includes a copy of the new Interpretive Notice. You can access an electronic copy of the submission letter at http://www.nfa.futures.org/news/newsRuleSubLetter.asp?ArticleID=1771.
Questions concerning these requirements should be directed to John Brodersen, Associate Director, Compliance, at firstname.lastname@example.org (312) 781-2226.