Interpretive Letters for Financial and Operational Rules

November 9, 2011—SEA Rule 15c3-1 Net Capital Treatment of Proprietary Assets Held with MF Global Inc.

 

On October 31, 2011, MF Global Inc. (MFGI) became subject to a liquidation proceeding under the Securities Investor Protection Act of 1970. As a result of the liquidation proceeding and reports of missing customer assets at MFGI, cash and securities assets held by MFGI on behalf of member firms may not be available for withdrawal for an extended period of time, rendering the assets illiquid and unavailable for normal broker-dealer business operations.

 

FINRA staff has discussed the net capital treatment of the assets with the staff of the SEC's Division of Trading and Markets and has been advised that effective immediately, member firms that have proprietary cash and/or securities held with MFGI pursuant to a proprietary account of an introducing broker-dealer (PAIB) agreement are required to apply a charge to their tentative net capital equal to 50 percent of the cash and securities. Dually registered broker-dealer/Futures Commission Merchant (FCM) members (BD/FCMs) must follow the regulatory guidance issued by the Joint Audit Committee via Regulatory Update #11-02 issued on November 4, 2011, for FCMs. As such, effective immediately, BD/FCMs must reflect customer segregated, secured 30.7 and commodities related proprietary trading balances held at MFGI at 60 percent of account balances (net liquidating value plus securities on deposit) for net capital purposes.

 

In addition, effective immediately, any other receivables from MFGI that are not included in the PAIB computation but that would ordinarily be an allowable asset for 30 days (e.g., commissions receivable) and any receivable from an affiliate of MFGI must be treated as a non-allowable asset.

 

Please note that the net capital treatment of proprietary assets held by MFGI, as discussed above, is subject to further change. Any questions regarding the foregoing should be directed to your firm's Regulatory Coordinator.

 


 

September 18, 2008—Additional, Temporary Relief from the Net Capital, Reserve Formula, Non-purpose Loan, and Maintenance Margin Requirements Applicable to Credit Extended on Auction Rate Securities to Broker-Dealers That Agree to Buy Back Auction Rate Securities

FINRA granted additional, temporary relief from the net capital, reserve formula, non-purpose loan, and maintenance margin requirements applicable to credit extended on auction rate securities to broker-dealers who have agreed to implement buyback programs for auction rate securities. See interpretive letter (PDF 50 KB) and Regulatory Notice 08-65.

 


 

April 11, 2008—Temporary Relief from the Requirements of FINRA and SEC Rules Regarding the Net Capital Charges Applicable to Credit Extended on Non-Marginable ARPS

 

FINRA released an interpretive letter (PDF 47 KB) on temporary relief from the requirements of FINRA and SEC Rules regarding the net capital charges applicable to credit extended on non-marginable Auction Rate Preferred Securities. The letter is in response to recent developments in the market for such securities.

 


 

April 24, 2008—Temporary Relief from the Requirements of FINRA and SEC Rules Regarding the Net Capital Charges Applicable to Credit Extended on Non-Marginable ARPS

 

Update to the April 11, 2008, Interpretive Letter: Auction Rate Preferred Securities (PDF 42 KB)

 

Update to the temporary relief from the requirements of FINRA and SEC Rules regarding the net capital charges applicable to credit extended on non-marginable ARPS. This update modifies the requirement to obtain secured bank loans for credit extended to customers collateralized by ARPS.