Thu, Mar 28, 2024
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Opalesque Futures Intelligence

Regulator News:

Proposals to Enhance Investor Protections Come from Regulators

Monday, May 07, 2012

In the wake of the MF Global situation, industry groups are developing proposals to enhance investor protections.

In a notice to members on April 2, the CMEGroup announced proposed changes that include daily reporting of customer segregation levels. Currently the exchange allows for monthly reporting except when a brokerage is on heightened watch, as MF Global was during its final days of existence. The derivatives exchange also recommended that brokerage firm chief executive officer, chief financial officer or other designated representative provide written approval for any wire transfer exceeding 25% of total firm capital.  In the final weeks of MF Global’s existence, near 100% of firm capital was wire transferred out of customer segregated accounts to various counterparties.  At the same time, MF Global customers who requested wire transfers were sent checks during which ultimately bounced.

The National Futures Association (NFA) is the other industry self-regulatory organization, a non-profit organization that is financed through a transactional fee on every trade.  The NFA requires FCMs it regulates to provide daily segregation reports through its Windjammer online system.  Key proposals for consideration coming out of the NFA include limits on transactions occurring from a customer to a non-customer account, limits on commingling customer accounts and a minimum requirement for brokerage firm excess funds.

In Congressional testimony on March 28, NFA president Daniel Roth announced four primary recommendations coming from the regulator and various futures exchanges:

  • Requiring all Futures Commission Merchants ("FCMs") to file daily reports concerning their segregated and secured funds. This will provide SROs with an additional means of monitoring firm compliance with segregation and secure amount requirements and a risk management tool to track trends or fluctuations in the amount of customer funds firms are holding and the amount of excess segregated and secured funds maintained by the firms.
  • Requiring all FCMs to file Segregation Investment Detail Reports reflecting how customer segregated and secured funds are invested and where those funds are held. These reports would be filed bimonthly and will enhance monitoring of how FCMs are investing customer segregated and secured funds.
  • Performing more frequent periodic spot checks to monitor FCM compliance with segregation and secured requirements. FCMs are already audited each year by both their Designated Self-Regulatory Organization and their outside accountant. Supplementing those audits with periodic, surprise testing focused on segregation requirements will increase regulatory scrutiny in this most critical area.
  • Requiring a principal of the FCM to approve any disbursements of customer segregated or secured funds not made for the benefit of customers and that exceed 25% of the firm's excess segregated or secured funds. The firm would also be required to provide immediate notice to its SROs.

In testimony, Mr. Roth anticipated some of the measures being adopted within a week while others may require rulemaking.

For full details, visit: http://www.nfa.futures.org/news/newsTestimony.asp?ArticleID=4005



 
This article was published in Opalesque Futures Intelligence.
Opalesque Futures Intelligence
Opalesque Futures Intelligence
Opalesque Futures Intelligence
Today's Exclusives
Today's Other Voices
More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. KKR raises $6.4bn for the largest pan-Asia infrastructure fund[more]

    Laxman Pai, Opalesque Asia: The New York-based global investment firm KKR has raised a record $6.4bn for its second Asia-focused infrastructure fund, underlining investors' continued appetite for private markets. According to a media release from the alternative assets manager, the figure top

  2. Bucking the trend, top hedge fund makes plans for a second SPAC[more]

    From Institutional Investor: SPACs aren't dead. At least not to the folks at Cormorant Asset Management. The life sciences firm, whose hedge fund topped its peers in 2023, is confident it will match the success of its first blank-check company. Last week, the life sciences and biopharma speciali

  3. Benefit Street Partners closes fifth fund on $4.7 billion[more]

    Bailey McCann, Opalesque New York: Benefit Street Partners has closed its fifth flagship direct lending vehicle, BSP Debt Fund V, with $4.7 billion of investable capital across the strategy. Benefit Street invests primarily in privately originated, floating rate, senior secured loans. The fun

  4. 4 hedge fund themes that are working in 2024[more]

    From The Street: A poor earnings report from Tesla (TSLA) has not hurt the indexes on Thursday. The decline in Tesla stock, which is losing its position in the Magnificent Seven pantheon, is more than offset by strong earnings from IBM (IBM) and ServiceNow (NOW) . In addition, the much higher-t

  5. Opalesque Exclusive: A global macro fund eyes opportunities in bonds[more]

    Bailey McCann, Opalesque New York for New Managers: Munich-based ThirdYear Capital rebounded in 2023, following a tough year for global macro. The firm's flagship ART Global Macro strategy finished the year up 1