At the recent NIBA meeting in Chicago several panel discussions focused on issues affecting the IB, CTA and CPO community. Regulations are always a hot topic for both Independent and Guaranteed IBs, especially at a time when rules are being created by the CFTC. The “Residual Interest Rule” which affects the FCMs net capital requirement as of November 14, 2014 could have a lasting impact on many IBs. This rule requires the FCM to capitalize margin calls older than T+1 (trade day plus 1 day).
To meet this new requirement the FCM will likely insist your customers meet their margin calls by wire or ACH, depending on the size of the call. In most cases, sending checks through the US mail will no longer be a viable option. In addition to the issue of collecting margins in a volatile market, the IB should be aware of their FCMs available excess capital as directional, emotional markets can impact the firm’s Net Capital Requirement.
Another issue that IBs should be aware of is cyber-security. The NFA has not set any specific rules or requirements, but they have issued guidance. As we gather customer documents, including personal information, and send customer documents and send it from our IB to our FCM electronically, it is essential to work with your FCM to assure transition of this information is done securely. Just as important is that it be secure from external and internal breaches when storing the customer information electronically in your office.
IBs using social media and instant messaging should be capturing their electronic conversations and saving them according to compliance rules. This likely is an issue auditors will be checking on soon.
The New CFTC Chairman has said he will review some of the rule making by the commission since Congress passed the Dodd-Frank Bill. But, we will have to comply with the rules as currently interpreted. My advice is to ask questions of your FCM Compliance personnel, and don’t hesitate to call the NFA directly. It will be time well spent.
Respectively submitted BY:
Paul J. Georgy
Allendale Inc
Guaranteed IB
NFA Board Member
