NFA details new client segregation rules

NFA details new client segregation rules explained by professional Forex trading experts the “NFA details new client segregation rules” FX trading team.

NFA details new client segregation rules

With thanks to Felix Shipkevich and the team at Shipkevich Law Firm…. The NFA has issued its new “safeguard recommendations” for registered Futures Commission Merchants (FCMs) which hold client funds. All U.S.-regulated retail Forex firms qualify as FCMs.

As we reported at the end of February, the CFTC held a two-day public roundtable to gather opinions on the issue of client fund safety, in the wake of more than $1 billion in missing client funds in the MF Global bankruptcy. And as it has taken less than two weeks since that roundtable for the NFA to come out with its detailed recommendations, it is quite clear that the issue was pre-decided by the NFA and CFTC.

The four recommendations include:

Filing of daily segregation reports.
Filing of bimonthly investment detail reports, showing how customer funds are invested and where those funds are held.
Periodic spot checks to monitor segregation requirements.
Requiring a principal of the firm to approve any disbursement of customer segregated funds not made for the benefit of customers, and that exceed 25% of the firm’s excess segregated or secured funds.

The issue of client fund segregation is certainly an important one in the Forex sector, as well as in other areas where companies hold client money for extended periods of time. However the NFA’s recommendations seem to be going from one extreme (i.e. under-supervision) to another extreme, and will, in our view, provide another death blow to all but the largest U.S. Forex firms, given the cost and complexity of abiding by the rules.

NFA details new client segregation rules Conclusion

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