JAC Issues Guidance on Margin Funds

The Joint Audit Committee (JAC) has issued a regulatory alert regarding the receipt and disbursement of margin funds. As noted in the regulatory alert, a futures commission merchant (FCM) is generally prohibited from applying deposits to a customer’s or noncustomer’s margin equity until the funds are actually received by the FCM. However, an FCM may apply an unsettled non-US dollar deposit to an account’s margin equity if certain conditions are met, including the requirements that the wire is initiated on day one of the margin call and the FCM treat unsettled non-US dollar disbursements from the account in the same manner.

The regulatory alert additionally provides that all accounts maintained for the same beneficial owner within the same account classification (segregated, secured or cleared swaps) must be combined for margin purposes. When making disbursements, FCMs must look at all accounts (including subaccounts) within the same account classification for the same beneficial owner, even if an account is under different control. 

The JAC regulatory alert is available here.

 

Topics:  FCMs, Joint Audit Committee, Margin Calls, Securities

Published In: Finance & Banking Updates, Securities Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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