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e7-173

  • [Federal Register: January 10, 2007 (Volume 72, Number 6)]

    [Rules and Regulations]

    [Page 1148-1152]

    From the Federal Register Online via GPO Access [wais.access.gpo.gov]

    [DOCID:fr10ja07-8]

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    COMMODITY FUTURES TRADING COMMISSION

    17 CFR Part 1

    RIN 3038--AC27

    Limitations on Withdrawals of Equity Capital

    AGENCY: Commodity Futures Trading Commission.

    ACTION: Final rule.

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    SUMMARY: The Commodity Futures Trading Commission (``Commission'') is amending its regulations to provide that the Commission may, by written order, temporarily prohibit a futures commission merchant (``FCM'') from carrying out equity withdrawal transactions that would reduce excess adjusted net capital by 30 percent or more. The proposed orders would be based on the Commission's determination that such withdrawal

    [[Page 1149]]

    transactions could be detrimental to the financial integrity of FCMs or could adversely affect their ability to meet customer obligations. The proposed amendments also would provide that an FCM may file with the Commission a petition for rescission of an order temporarily prohibiting equity withdrawals from the FCM.

    DATES: Effective March 12, 2007.

    FOR FURTHER INFORMATION CONTACT: Thomas J. Smith, Deputy Director and Chief Accountant, at (202) 418-5430, or Thelma Diaz, Special Counsel, at (202) 418-5137, Division of Clearing and Intermediary Oversight, Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st Street, NW., Washington, DC 20581. Electronic mail:

    tsmith@cftc.gov or tdiaz@cftc.gov.

    SUPPLEMENTARY INFORMATION:

    I. Introduction

    The Commission issued a release with proposed amendments to Part 1 of the Commission's regulations in September of 2006, as published for notice and comment in the Federal Register (the ``Proposing Release'').\1\ The Commission received comment letters from the Joint Audit Committee (``JAC'') \2\ and two designated contracts markets, the Chicago Mercantile Exchange, Inc. and the Minneapolis Grain Exchange.\3\ All of the commenters endorsed the proposed amendments to Regulation 1.17(g), which would provide for Commission orders that temporarily restrict equity capital withdrawals from FCMs if the Commission finds that such withdrawals may be detrimental to the financial integrity of the FCM or may unduly jeopardize its ability to meet customer obligations or other liabilities that may cause a significant impact on the markets. The Proposing Release also included other proposed amendments to Regulations 1.12 and 1.17, which would update these regulations by adding references to ``limited liability companies'' and ``limited liability company members.'' \4\ For the reasons discussed below, the Commission is adopting each of these amendments as proposed in the Proposing Release.

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    \1\ See 71 FR 57451 (September 29, 2006).

    \2\ The JAC is a committee formed by U.S. commodity futures and options exchanges and the National Futures Association to coordinate audit and financial surveillance activities of FCMs. \3\ The comment letters are available for inspection and copying at the Commission's Washington office in its public reading room, Room 4072, Three Lafayette Centre, 1155 21st Street, NW., Washington, DC 20581. The telephone number for the public reading room is (202) 418-5025. The comment letters are also available on the Commission's public Web site, at http://frwebgate.access.gpo.gov/cgi-bin/leaving.cgi?from=leavingFR.html&log=linklog&to=http://www.cftc.gov/[fxsp0]foia/comment06/foi06-007--1.htm.

    \4\ The Commission has revised other regulations to reflect the development of limited liability companies (``LLCs''). See, e.g. 69 FR 49784, 49793-4 (August 12, 2004). The amendments adopted in 2004 related to the management of LLCs, in order to determine persons with appropriate signature authority to file financial reports for the FCM or IB.

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    II. Background

    Commission Regulation 1.17(e) prohibits all equity withdrawal transactions that would reduce the adjusted net capital of FCMs or introducing brokers (``IBs'') beyond the amounts permitted by the regulation.\5\ The transactions affected by the regulation include any withdrawals made by the action of a stockholder or partner or by redemption or repurchase of shares of stock by ``consolidated entities'',\6\ dividend payments or similar distributions, or through unsecured advances or loans made to stockholders, partners, sole proprietors, or employees. When determining the effect of the proposed equity withdrawal transaction on the firm's capital, the firm also must take into account other pending equity withdrawal transactions and scheduled liability payments that will reduce its capital within six months after the subject equity withdrawal transaction.\7\ The proposed equity withdrawal transaction is prohibited if, when added together with such other planned capital reductions, it would result in capital levels that are less than required by Regulation 1.17(e).

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    \5\ Commission regulations cited in this release may be found at

    17 CFR Ch. I (2006). Generally speaking, Regulation 1.17(e)

    prohibits equity withdrawal transactions if such withdrawals would

    reduce the firm's adjusted net capital to less than 120 percent of

    its minimum adjusted net capital requirement under Regulation

    1.17(a)(1). Such transactions also are prohibited if they would

    result in less than the minimum amount of equity required under

    Regulation 1.17(d), which provides that FCMs and IBs must maintain a

    debt-equity ratio of at least 30 percent equity.

    \6\ Commission Regulation 1.17(f) requires, and in other

    circumstances permits, FCMs and IBs to consolidate the assets and

    liabilities of their subsidiaries and/or affiliates in a single

    computation of adjusted net capital for the FCM or IB and its

    consolidated entities.

    \7\ Regulation 1.17(e) specifically requires the firm to combine

    the amount of the subject equity withdrawal transaction with any of

    the following that are scheduled to occur within six months after

    the subject withdrawal: any other proposed equity withdrawal; any

    payments under satisfactory subordination agreements under

    Regulation 1.17(h); and any payments of the liabilities identified

    in Regulation 1.17(c)(4)(vi).

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    The purpose of these equity withdrawal restrictions is to help

    preserve and enhance the required compliance by FCMs and IBs with the

    minimum financial requirements set forth in the Commission's

    regulations.\8\ As the Commission has explained elsewhere, the

    Commission's minimum financial requirements protect customers and other

    market participants by requiring FCMs and IBs to maintain minimum

    levels of liquid assets in excess of their liabilities to finance their

    business activities.\9\ Moreover, pursuant to Section 4d of the

    Act,\10\ FCMs are required to segregate from their own assets all

    money, securities, and other property held for customers as margin for

    their commodity futures and option contracts, as well as any gains

    accruing to customers from their open futures and option positions.

    Part 30 of the Commission's regulations also calls for FCMs to set

    aside funds, called the ``foreign futures and foreign options secured

    amount'', to help protect the funds of U.S. customers trading on non-

    U.S. futures markets.\11\ In the event of a shortfall in the Section 4d

    segregated funds or the Part 30 secured funds that an FCM must hold,

    the Commission's minimum net capital requirements provide protection to

    customers by requiring each FCM to maintain a minimum level of assets

    that are readily available to be contributed in the event of a

    shortfall in the customer funds. The minimum capital requirements also

    protect customers and market participants by ensuring that an FCM

    remains solvent while waiting for margin calls to be met.

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    \8\ Section 4f(b) of the Commodity Exchange Act (``Act'')

    authorizes the Commission, by regulation, to impose minimum

    financial and related reporting requirements on FCMs and IBs. The

    Act is codified at 7 U.S.C. 1 et seq. (2000), and Section 4f(b) of

    the Act is codified at 7 U.S.C. 6f(b).

    \9\ 68 FR 40835, 40836 (July 9, 2003) (Minimum Financial and

    Related Reporting Requirements for Futures Commission Merchants and

    Introducing Brokers).

    \10\ Section 4d of the Act is codified at 7 U.S.C. 6d (2000).

    \11\ The term ``foreign futures and foreign options secured

    amount'' is defined in Regulation 1.3(rr).

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    As an additional measure to ensure capital compliance by FCMs,

    Commission Regulation 1.12(g)(2) requires each FCM to provide notice to

    the Commission of certain equity withdrawal transactions.\12\ In

    particular, Regulation 1.12(g)(2) requires each FCM to provide notice

    at least two business days prior to an action to withdraw equity from

    the FCM, or a subsidiary or affiliate consolidated pursuant to

    Regulation 1.17(f), if the equity withdrawal transaction would cause,

    on a net basis, a reduction in the FCM's excess adjusted net capital of

    30 percent or more. In response to the receipt of such a notice,

    Regulation 1.12(g)(3) provides that the Director of the Commission's

    Division of Clearing and Intermediary Oversight (``Division''), or the

    Director's designee, may require that the FCM provide, within three

    business

    [[Page 1150]]

    days from the date of the request or such shorter period as the

    Director or designee may specify, such other information as the

    Director or designee determines to be necessary based upon market

    conditions, reports provided by the FCM, or other available

    information.\13\

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    \12\ Regulation 1.12(g) applies only to FCMs and not IBs.

    \13\ Regulation 1.12(g)(2) also provides that the Commission may

    require the FCM to cause a Material Affiliated Person, as that term

    is defined in Commission Regulation 1.14(a)(2), to respond to

    requests for information from the Division Director.

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    When first proposing the notification provision eventually adopted

    as Regulation 1.12(g)(2), the Commission noted that it could serve as

    ``early warning'' of impending financial difficulties at an FCM or at

    its holding company.\14\ The only consequence that the regulation

    expressly contemplates as a result of the warning is that the

    Commission may require additional information from the FCM, with the

    response to be provided in a period of three days or less, as directed

    by the Commission. At the time that Regulation 1.2(g)(2) was adopted,

    the Commission determined that it was not necessary to adopt additional

    limitations within the Commission's regulations on equity withdrawal

    transactions.\15\

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    \14\ The provisions of this regulation originally were included

    among several proposals made by the Commission in 1994 in response

    to the financial difficulties experienced by certain FCMs operating

    within holding company structures. These proposals were intended to

    provide the Commission with access to information concerning the

    activities of FCM affiliates whose activities were reasonably likely

    to have a material impact on the financial or operational condition

    of the FCM. The Commission subsequently determined, in response to

    the recommendations of several commenters, that the notice

    requirements in Regulation 1.12(g) should be applied broadly to all

    FCMs, and not just to those subject to reporting requirements with

    respect to their material affiliates. See, generally, 59 FR 9689,

    9690-9691 (March 1, 1994) (Risk Assessment for Holding Company

    Systems).

    \15\ 61 FR 19177, 19180 (May 1, 1996).

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    However, the recent precipitous decline of a large FCM holding

    company has confirmed that expedited action may be necessary to protect

    FCM capital in the face of increasing financial pressures experienced

    by its parent and/or affiliated entities. In this recent example, the

    FCM registrant was part of a complex organizational group consisting of

    several layers of holding companies and their subsidiaries. In October

    of 2005, the parent company for the group announced that its chief

    executive officer had been placed on leave, and that its financial

    statements for the years 2002 through 2005 should not be relied upon.

    The next day, federal authorities charged the chief executive officer

    with securities fraud, and on the following day the holding company

    declared that certain liquidity difficulties were causing it to impose

    a 15-day moratorium for the activities of a nonregulated subsidiary.

    According to prior financial filings of the holding company, this

    nonregulated subsidiary had been responsible for a material portion of

    the holding company's business.

    In response to these foregoing events, the Securities and Exchange

    Commission (``SEC'') issued an order to temporarily restrict

    withdrawals of capital from two other subsidiaries of the holding

    company, which were registered as securities broker-dealers.\16\ In

    issuing the order, the SEC cited to its regulation, 17 CFR 240.15c3-

    1(e)(3)(i), which provides that the SEC may by order restrict, for a

    period up to twenty business days, any withdrawal by the broker or

    dealer of equity capital or unsecured loan or advance to a stockholder,

    partner, sole proprietor, employee or affiliate, if (1) such

    withdrawal, advance or loan when aggregated with all other withdrawals,

    advances or loans on a net basis during a 30 calendar day period,

    exceeds 30 percent of the broker or dealer's excess net capital; and

    (2) the SEC, based on the facts and information available, concludes

    that the withdrawal, advance or loan may be detrimental to the

    financial integrity of the broker or dealer, or may unduly jeopardize

    the broker or dealer's ability to repay its customer claims or other

    liabilities that may cause a significant impact on the markets or

    expose the customers or creditors of the broker or dealer to loss

    without taking into account the application of the Securities Investor

    Protection Act.\17\ As described by the SEC, Sec. 240.15c3-1(e)(3)(i)

    enables the SEC and its staff to examine further the financial

    condition of the broker-dealer, so as to determine whether, and under

    what circumstances, to permit the withdrawal, entirely or partially, or

    to prohibit the withdrawal for additional periods by issuing subsequent

    orders, with terms that are no longer than twenty business days.\18\

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    \16\ A copy of the SEC order, dated October 13, 2005, may be

    accessed electronically at http://frwebgate.access.gpo.gov/cgi-bin/leaving.cgi?from=leavingFR.html&log=linklog&to=http://www.sec.gov/rules/[fxsp0]other/34-

    52606.pdf.

    \17\ This SEC regulation also provides that an order temporarily

    prohibiting the withdrawal of capital shall be rescinded if,

    sometime after a hearing that is to be held within two business days

    from the date of the request in writing by the broker or dealer, the

    SEC determines that the restriction on capital withdrawal should not

    remain in effect. See 17 CFR 240.15c3-1(e)(3)(ii).

    \18\ 55 FR 34027, 34030 (August 15, 1990) (proposing amendments

    to SEC Regulation 15c3-1 regarding withdrawals of equity capital).

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    III. Amendments to Regulations 1.12 and 1.17

    As proposed in the Proposing Release, the Commission is adding a

    new paragraph (g) to Regulation 1.17, which will enhance the

    Commission's ability, in the face of fast-developing events, to impose

    temporary restrictions on the flow of capital from an FCM to its

    holding company and other affiliated entities, as appropriate.\19\ It

    is imperative that the Commission have the option to consider requiring

    such temporary delays of equity withdrawals whenever urgent

    circumstances so require. Under the amended regulation, the Commission

    may issue a written order to impose temporary restrictions on equity

    withdrawals for a period of up to twenty business days, and the

    Commission may continue to make the restrictions effective against the

    FCM by issuing subsequent orders, each with a term of no more than

    twenty business days. The order would restrict any withdrawal by the

    FCM of equity capital, or any unsecured advance or loan to a

    stockholder, partner, limited liability company member, sole

    proprietor, employee or affiliate, if:

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    \19\ Paragraph (g) of Regulation 1.17 currently is reserved.

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    (i) Such withdrawal, advance or loan, when aggregated with all

    other withdrawals, advances or loans during a 30 calendar day period

    from the FCM, or from a subsidiary or affiliate of the FCM consolidated

    pursuant to Sec. 1.17(f), would cause a net reduction in the FCM's

    excess adjusted net capital of 30 percent or more; and

    (ii) The Commission has concluded, in light of available facts and

    circumstances, that such withdrawal, advance or loan may be detrimental

    to the financial integrity of the FCM, or may unduly jeopardize its

    ability to meet customer obligations or other liabilities that may

    cause a significant impact on the markets.

    During the periods that such orders are effective, Commission staff

    may evaluate the effect of the proposed withdrawals on the continuing

    adequacy of customer safeguards at the firm, including the continuing

    adequacy of the firm's liquid assets, in light of the most current

    information available from the FCM concerning its operations and those

    of its holding company and affiliates. These amendments to Regulation

    1.17 may therefore serve to further enhance the security of customer

    funds and the overall financial integrity of the futures markets.\20\

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    \20\ In the years since the Commission last adopted rule

    amendments addressing equity withdrawal transactions, the amount of

    funds that FCMs are required to hold as segregated funds has more

    than doubled. As of August 31, 1995, FCMs were required to hold

    approximately $25 billion as segregated funds, and $6 billion as

    secured funds. As of December 31, 2005, the amount that FCMs were

    required to hold as segregated funds had increased to over $95

    billion, and the amount required to be held as secured funds had

    grown to almost $25 billion.

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    [[Page 1151]]

    The Commission also is amending Regulation 1.17(g)(2) to provide

    that an FCM may file a written petition with the Commission to request

    rescission of an order temporarily restricting equity withdrawals from

    the FCM. The Commission will notify the FCM in writing that its

    petition for rescission had been denied, or, if the Commission

    determined that the order should not remain in effect, the order would

    be rescinded. The petition filed by the FCM must specify the facts and

    circumstances supporting its request for rescission.

    Finally, the Commission is also amending Commission Regulations

    1.12(g)(2), 1.17(d)(1), and 1.17(e), as proposed in the Proposing

    Release. These regulations include references to FCMs and IBs that are

    organized as corporations, partnerships, or sole proprietorships, but

    currently lack a specific reference to firms organized as limited

    liability companies. By including applicable references for limited

    liability companies and their members, the amended regulations

    modernize the provisions of Regulations 1.12 and 1.17.

    IV. Related Matters

    A. Regulatory Flexibility Act

    The Regulatory Flexibility Act (``RFA''), 5 U.S.C. 601 et seq.,

    requires that agencies, when amending their rules, consider the impact

    of those amendments on small businesses. The Commission included in the

    Proposing Release a certification from the Chairman that these rules

    would not have a significant economic impact on a substantial number of

    small entities.\21\ The Commission received no comments on the

    certification.

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    \21\ 71 FR at 57452.

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    B. Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (``PRA'') \22\ imposes certain

    requirements on federal agencies (including the Commission) in

    connection with their conducting or sponsoring any collection of

    information as defined by the PRA. As noted in the Proposing

    Release,\23\ these amended regulations do not require a new collection

    of information on the part of the entities that are subject to the

    amended regulations.

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    \22\ 44 U.S.C. 3507(d).

    \23\ 71 FR at 57453.

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    C. Cost-Benefit Analysis

    Section 15(a) of the Act requires the Commission to consider the

    costs and benefits of its action before issuing a new regulation under

    the Act. By its terms, Section 15(a) as amended does not require the

    Commission to quantify the costs and benefits of a new regulation or to

    determine whether the benefits of the regulation outweigh its costs.

    Rather, Section 15(a) simply requires the Commission to ``consider the

    costs and benefits'' of its action.

    Section 15(a) of the Act further specifies that costs and benefits

    shall be evaluated in light of five broad areas of market and public

    concern: Protection of market participants and the public; efficiency,

    competitiveness, and financial integrity of futures markets; price

    discovery; sound risk management practices; and other public interest

    considerations. Accordingly, the Commission could in its discretion

    give greater weight to any one of the five enumerated areas and could

    in its discretion determine that, notwithstanding its costs, a

    particular regulation was necessary or appropriate to protect the

    public interest or to effectuate any of the provisions or to accomplish

    any of the purposes of the Act. The amended Regulation 1.17(g) enables

    the Commission to issue orders temporarily restricting certain equity

    withdrawal transactions in circumstances that pose significant concerns

    for the financial condition of FCMs. The Commission has considered the

    costs and benefits of the amended regulation in light of the specific

    provisions of Section 15(a) of the Act, as follows:

    1. Protection of market participants and the public. Under the

    amended Regulation 1.17(g), the Commission would be able, in

    exceptional circumstances, to temporarily delay certain withdrawals of

    FCM equity by their owners and other insiders, which would contribute

    to the benefit of ensuring that eligible FCMs can meet their financial

    obligations to customers and other market participants.

    2. Efficiency and competition. The amended regulations should have

    no effect, from the standpoint of imposing costs or creating benefits,

    on the efficiency and competition of the futures markets.

    3. Financial integrity of futures markets and price discovery.

    Amended Regulation 1.17(g) contributes to the financial integrity of

    futures markets by helping to confirm and preserve the capital of FCM

    registrants. The amended regulations should have no effect, from the

    standpoint of imposing costs or creating benefits, on the price

    discovery function of such markets.

    4. Sound risk management practices. In order to avoid application

    of amended Regulation 1.17(g), FCMs may enhance existing risk

    management practices relating to the risks that practices of FCM

    affiliates may pose to the ability of FCMs to meet their obligations to

    customers and other participants in the futures markets.

    5. Other public interest considerations. The amendments to

    Regulations 1.12(g), 1.17(d)(1) and 1.17(e), which add references to

    limited liability company members and their capital contributions, help

    modernize the Commission's regulations by taking into consideration new

    forms of business organizations used by FCMs and IBs.

    The Commission invited, but did not receive, public comment on its

    application of the cost-benefit provision.\24\ After considering these

    factors, the Commission has determined to issue this final rule.

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    \24\ 71 FR at 5745.

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    List of Subjects in 17 CFR Part 1

    Brokers, Commodity futures, Reporting and recordkeeping

    requirements.

    0

    Accordingly, 17 CFR Chapter I is hereby amended as follows:

    PART 1--GENERAL REGULATIONS UNDER THE COMMODITY EXCHANGE ACT

    0

    1. The authority citation for part 1 continues to read as follows:

    Authority: 7 U.S.C. 1a, 2, 5, 6, 6a, 6b, 6c, 6d, 6e, 6f, 6g, 6h,

    6i, 6j, 6k, 6l, 6m, 6n, 6o, 6p, 7, 7a, 7b, 8, 9, 12, 12a, 12c, 13a,

    13a-1, 16, 16a, 19, 21, 23, and 24, as amended by the Commodity

    Futures Modernization Act of 2000, Appendix E of Pub. L. No. 106-

    554, 114 Stat. 2763 (2000).

    0

    2. Section 1.12 is amended by revising paragraph (g)(2) to read as

    follows:

    Sec. 1.12 Maintenance of minimum financial requirements by futures

    commission merchants and introducing brokers.

    * * * * *

    (g) * * *

    (2) If equity capital of the futures commission merchant or a

    subsidiary or affiliate of the futures commission merchant consolidated

    pursuant to Sec. 1.17(f) (or 17 CFR 240.15c3-1e) would be withdrawn by

    action of a stockholder or a partner or a limited liability company

    member or by redemption or repurchase of shares of stock by any of

    [[Page 1152]]

    the consolidated entities or through the payment of dividends or any

    similar distribution, or an unsecured advance or loan would be made to

    a stockholder, partner, sole proprietor, limited liability company

    member, employee or affiliate, such that the withdrawal, advance or

    loan would cause, on a net basis, a reduction in excess adjusted net

    capital (or, if the futures commission merchant is qualified to use the

    filing option available under Sec. 1.10(h), excess net capital as

    defined in the rules of the Securities and Exchange Commission) of 30

    percent or more, notice must be provided at least two business days

    prior to the withdrawal, advance or loan that would cause the

    reduction: Provided, however, That the provisions of paragraphs (g)(1)

    and (g)(2) of this section do not apply to any futures or securities

    transaction in the ordinary course of business between a futures

    commission merchant and any affiliate where the futures commission

    merchant makes payment to or on behalf of such affiliate for such

    transaction and then receives payment from such affiliate for such

    transaction within two business days from the date of the transaction.

    * * * * *

    0

    3. Section 1.17 is amended by revising paragraph (d)(1) introductory

    text; adding paragraph (d)(1)(ii)(D); revising paragraph (e)

    introductory text; and adding paragraph (g), to read as follows:

    Sec. 1.17 Minimum financial requirements for futures commission

    merchants and introducing brokers.

    * * * * *

    (d) * * *

    (1) Equity capital means a satisfactory subordination agreement

    entered into by a partner or stockholder or limited liability company

    member which has an initial term of at least 3 years and has a

    remaining term of not less than 12 months if:

    * * * * *

    (ii) * * *

    (D) In the case of a limited liability company, the sum of its

    capital accounts of limited liability company members, and unrealized

    profit and loss.

    * * * * *

    (e) No equity capital of the applicant or registrant or a

    subsidiary's or affiliate's equity capital consolidated pursuant to

    paragraph (f) of this section, whether in the form of capital

    contributions by partners (including amounts in the commodities,

    options and securities trading accounts of partners which are treated

    as equity capital but excluding amounts in such trading accounts which

    are not equity capital and excluding balances in limited partners'

    capital accounts in excess of their stated capital contributions), par

    or stated value of capital stock, paid-in capital in excess of par or

    stated value, retained earnings or other capital accounts, may be

    withdrawn by action of a stockholder or partner or limited liability

    company member or by redemption or repurchase of shares of stock by any

    of the consolidated entities or through the payment of dividends or any

    similar distribution, nor may any unsecured advance or loan be made to

    a stockholder, partner, sole proprietor, limited liability company

    member, or employee if, after giving effect thereto and to any other

    such withdrawals, advances, or loans and any payments of payment

    obligations (as defined in paragraph (h) of this section) under

    satisfactory subordination agreements and any payments of liabilities

    excluded pursuant to paragraph (c)(4)(vi) of this section which are

    scheduled to occur within six months following such withdrawal, advance

    or loan:

    * * * * *

    (g)(1) The Commission may by order restrict, for a period up to

    twenty business days, any withdrawal by a futures commission merchant

    of equity capital, or any unsecured advance or loan to a stockholder,

    partner, limited liability company member, sole proprietor, employee or

    affiliate, if:

    (i) Such withdrawal, advance or loan would cause, when aggregated

    with all other withdrawals, advances or loans during a 30 calendar day

    period from the futures commission merchant or a subsidiary or

    affiliate of the futures commission merchant consolidated pursuant to

    Sec. 1.17(f) (or 17 CFR 240.15c3-1e), a net reduction in excess

    adjusted net capital (or, if the futures commission merchant is

    qualified to use the filing option available under Sec. 1.10(h),

    excess net capital as defined in the rules of the Securities and

    Exchange Commission) of 30 percent or more, and

    (ii) The Commission, based on the facts and information available,

    concludes that any such withdrawal, advance or loan may be detrimental

    to the financial integrity of the futures commission merchant, or may

    unduly jeopardize its ability to meet customer obligations or other

    liabilities that may cause a significant impact on the markets.

    (2) The futures commission merchant may file with the Secretary of

    the Commission a written petition to request rescission of the order

    issued under paragraph (g)(1) of this section. The petition filed by

    the futures commission merchant must specify the facts and

    circumstances supporting its request for rescission. The Commission

    shall respond in writing to deny the futures commission merchant's

    petition for rescission, or, if the Commission determines that the

    order issued under paragraph (g)(1) of this section should not remain

    in effect, the order shall be rescinded.

    * * * * *

    Issued in Washington, DC, on January 5, 2007 by the Commission.

    Eileen Donovan,

    Acting Secretary of the Commission.

    [FR Doc. E7-173 Filed 1-9-07; 8:45 am]

    BILLING CODE 6351-01-P

    Last Updated: May 9, 2012



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