CFTC Guidance - Commodity Futures Trading Commission

U.S. COMMODITY FUTURES TRADING COMMISSIONDivision of Swap Dealer and Intermediary Oversight140 Broadway, New York, NY 10005Telephone: (646) 746-9834Facsimile: (646) 746-9937E-Mail: kpiccoli@cftc.govKevin C. PiccoliDeputy DirectorTo: All Futures Commission MerchantsAttention: Chief Financial OfficerSubject: Segregated and Secured Funds Maintained in a Combined OmnibusAccountDate: September 28, 2012The Division of Swap Dealer and Intermediary Oversight (“Division”) of the CommodityFutures Trading Commission (“Commission” or “CFTC”) is issuing this letter to futurescommission merchants (“FCMs”) to clarify the record keeping requirements for customersegregated and secured funds maintained in carrying broker omnibus accounts.CFTC Regulations 1.20 and 30.7 require, among other things, that an FCM shall depositcustomer funds under an account name which clearly identifies them as such and showsthat they are segregated or secured pursuant to these aforementioned rules. TheCommission Staff notes that a few FCMs have maintained a single combined customeromnibus account with a carrying FCM for segregated and secured customer trading andassets. The single account had memo entries to denote the amount of segregated versussecured assets. The Commission Staff has determined that a single account holding bothsegregated and secured assets, regardless of memo notation as to allocation of the assets,does not provide a clear delineation of the assets and, in the event of a bankruptcy, may putcustomer funds at risk.Therefore, in order to ensure clear recordkeeping in accordance with CFTC Regulations1.20 and 30.7, an FCM must maintain separate omnibus accounts with a carrying FCM forsegregated and secured customer trading and assets. These accounts must be clearly titledas segregated 1.20 or secured 30.7 funds held for the benefit of customers pursuant to theaforementioned rules. Further, account acknowledgement letters must be obtained foreach account.ContactsIf an FCM has questions on any of the foregoing, please feel free to contact Division stafflisted in the table attached as Appendix A.cc: Joint Audit Committee

September 17, 2012DIVISION OF SWAP DEALER AND INTERMEDIARYOVERSIGHTRegionalOfficeLocations140 Broadway,18 TH FloorNew York, NY10005-1146525 WestMonroe StreetSuite 1100Chicago, IL606614900 MainStreet, Suite500Kansas City,MO 64112ContactsRonald CarlettaAssociate DirectorPhone: 646-746-9726FAX: 646-746-9937E-Mail: rcarletta@cftc.govUniversal E-Mail:examinations-bc-ny@cftc.govMelissa B. HendricksonAssociate DirectorPhone: 312-596-0661FAX: 312-596-0713E-Mail:mhendrickson@cftc.govUniversal E-Mail:examinations-bc-ch@cftc.govAPPENDIX AEastern RegionCentral RegionLocation of FCM’sPrincipal OfficeAll states east of the Mississippi River, exceptIllinois, Indiana, Michigan, Ohio, andWisconsin.Any location outside of the United StatesIllinois, Indiana, Michigan, Ohio, andWisconsinSouthwestern RegionThomas BloomAll states west of the Mississippi RiverAssociate DirectorPhone: 816-960-7710FAX: 816-960-7750E-Mail: tbloom@cftc.govUniversal E-Mail:examinations-bc-kc@cftc.govInternet WebsitesCommodity Futures Trading CommissionCode of Federal Regulations (Title 17)http://www.cftc.govhttp://ecfr.gpoaccess.gov