Commission Rule 1.14 and 1.15;
The Division of Clearing and Intermediary Oversight issued a letter denying a request from an FCM seeking relief from certain risk assessment reporting and recordkeeping requirements set forth in Commission Rules 1.14 and 1.15, respectively. Rules 1.14 and 1.15 set forth requirements which permit the Commission to obtain information concerning activities of FCM affiliates that could pose material risks to the FCM. In support of its request for relief, the FCM indicated that it has not conducted any futures brokerage activities since its inception and does not plan to conduct such activities in the future, and stated that, as a dually-registered BD/FCM, it files with the SEC a Form 17-H and makes available for inspection by the SEC all supporting documentation. The Division noted that the Commission, upon adopting the risk assessment rules, did not grant a complete exemption from Rules 1.14 and 1.15 for firms filing a Form 17-H with the SEC, and recognized that the risk management policies requirements pertain to activities involving instruments, such as securities or swaps, that are generally outside of the Commission’s transactional jurisdiction. The Division also noted that firms that are registered FCMs must comply with the regulatory requirements pertaining to FCMs, regardless of the extent, at any given time, of their involvement in futures-related activities. In conclusion, the Division determined that the FCM did not demonstrate special circumstances to justify granting the relief sought. The Division noted, however, that the FCM may continue to rely upon the exemption from certain provisions of Rules 1.14 and 1.15 applicable to those firms that file Form 17-H with the SEC.