On January 23, the Commodity Futures Trading Commission’s Division of Swap Dealer and Intermediary Oversight (DSIO) issued a no-action letter regarding financial reporting requirements as they apply to foreign introducing brokers (IBs). The no-action relief allows foreign domiciled IBs and IB applicants to (1) prepare and file Form 1-FR using accounting principles of the IB’s jurisdiction in lieu of US Generally Accepted Accounting Principles or International Financial Reporting Standards, and (2) report account balances on Form 1-FR-IB in the local currency of the IB’s jurisdiction without applying the foreign currency capital charges that would otherwise be required by CFTC Regulation 1.17 (and related CFTC staff guidance) when calculating adjusted net capital.
This relief is subject to the following conditions: (1) Form 1-FR-IB and all certified financial reports must be prepared in English; (2) Form 1-FR-IB must include a Statement of the Computation of the Minimum Capital Requirements prepared in accordance with CFTC Regulation 1.17 and a second Statement of the Computation of the Minimum Capital Requirements with balances converted to US dollars as of the reporting date to demonstrate that the IB is in compliance with the CFTC’s capital requirements; and (3) each IB must comply with the foreign currency capital charges set forth in CFTC Regulation 1.17 and CFTC staff guidance, but may exclude capital charges for deposits of the IB’s local currency in the IB’s jurisdiction or in money center countries.
The no-action letter also states that DSIO will not recommend enforcement action against an IB that, in computing its adjusted net capital under CFTC Regulation 1.17, recognizes as a current asset a commissions receivable balance from an over-the-counter swap customer that has been billed during the calendar month of the receivable balance’s origination and that has not aged more than 30 days from when it was billed.
The no-action letter is available here.