Resources regarding separate accounts of the same beneficial owner

10 February 2021

As a reminder, March 31, 2021 is the deadline specified in the CFTC’s Supplemental Advisory and Time-Limited No-Action Relief Letter 20-28 (“NAL 20-28”) for Futures Commission Merchants (“FCMs”) and their clients to take certain steps with respect to margining of separate accounts with the same beneficial owner and related agreements.  Specifically, FCMs that are relying on the relief set forth in CFTC’s Advisory and Time-Limited No-Action Relief Letter 19-17 (“NAL 19-17”) with respect to Regulation 39.13(g)(8)(iii) have until March 31 to comply with its conditions. In addition, FCMs have until March 31 to cure and mitigate legal risk with respect to customer agreements that can be construed as representations to limit recourse in violation of Regulation 1.56.  According to NAL 20-28, NAL 19-17 made clear that under Regulation 1.56(b) FCMs cannot agree to guarantee against or limit loss of the beneficial owner and under Regulation 1.56 (c) “no person” may represent that an FCM will engage in acts or practices described in 1.56(b).

FIA, jointly with SIFMA AMG, released Sample Provisions for FCM Customer Agreements (the “Sample Provisions”) that are a compilation of optional contractual provisions for consideration by market participants should they want to use standardized language in their clearing agreements where an FCM has separate accounts of the same beneficial owner.

The Sample Provisions are intended to serve as a resource for market participants to consider as they review their clearing agreements for compliance with the NAL 19-17, NAL 20-28 and related guidance, including the September 13, 2019 Statement by the Directors of the Division of Clearing and Risk and the Division of Swap Dealer and Intermediary Oversight Concerning the Treatment of Separate Accounts of the Same Beneficial Owner.

This Notice is not nor should be construed as legal advice. Market participants will need to determine applicable regulatory obligations and whether, and to what extent, to include any of the Sample Provisions in their agreements, and whether additional or modified language is required to demonstrate compliance with CFTC Regulations consistent with their current agreements, documentation or other arrangements.

  • FIA
  • Compliance
  • Advocacy
  • Operational and Regulatory Guidance
  • Americas
  • Operational and Regulatory Guidance
  • Regulatory Guidance