In the wake of the failure of Peregrine Financial Group Inc. amid allegations that it misappropriated customer funds, a committee of futures industry regulators announced steps to ensure client assets are protected.
A special committee of representatives from the futures industry’s self-regulatory organizations (SROs) is proposing additional measures designed to strengthen safeguards for customer segregated and secured funds held at futures firms.
The committee, which was formed back in January, includes representatives from CME Group, the National Futures Association (NFA), InterContinental Exchange, Kansas City Board of Trade and the Minneapolis Grain Exchange, unanimously agreed to immediately begin the process of confirming the balances of customer segregated bank accounts for all futures brokers using a web-based electronic confirmation process.
Additionally, the SROs said that they will develop rules to require all firms to provide their SRO with direct online access to confirm segregated and secured funds balances at the banks which hold their customers’ segregated and secured funds. Any bank depository that fails to provide online access will not be considered an acceptable depository.
Back in May, the committee recommended, among other things, that all futures firms be required to file daily reports on their segregated and secured assets, as well as bimonthly reports that show how those funds are invested and where they are held; and, that approval be required to disburse funds, not for the benefit of customers, that exceed 25% of the firm’s excess segregated or secured funds. Those changes were approved by the US Commodity Futures Trading Commission (CFTC) last week, and they become effective on September 1.