INTL FCStone 2012 Annual Report Download - page 25
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Please find page 25 of the 2012 INTL FCStone annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.INTL FCSTONE INC.Form10K 9
PART I
ITEM 1 Business
e commodities industry in the United States is subject to
extensive regulation under federal law. e Company is required
to comply with a wide range of requirements imposed by the
Commodity Futures Trading Commission (the “ CFTC” ), the
National Futures Association (the “ NFA” ) and the Chicago
Mercantile Exchange, which is our designated self-regulatory
organization. e Company is also a member of the Chicago
Mercantile Exchange’s divisions: the Chicago Board of Trade,
the New York Mercantile Exchange and COMEX, ICE Futures
US, ICE Europe Ltd, the Minneapolis Grain Exchange and the
Kansas City Board of Trade. ese regulatory bodies are charged
with protecting customers by imposing requirements relating to
capital adequacy, licensing of personnel, conduct of business,
protection of customer assets, record-keeping, trade-reporting
and other matters.
e securities industry in the United States is subject to extensive
regulation under federal and state securities laws. e Company
is required to comply with a wide range of requirements imposed
by the Securities and Exchange Commission (the “ SEC” ),
state securities commissions and Financial Industry Regulatory
Authority (“FINRA”). ese regulatory bodies are charged with
safeguarding the integrity of the nancial markets and with
protecting the interests of investors in these markets.
ey also impose minimum capital requirements on regulated
entities. e activities of our broker-dealer subsidiaries in the
United States, INTL FCStone Securities and FCC Investments,
Inc., are primarily regulated by FINRA and the SEC.
On July 21, 2010, the President signed into law the Dodd-Frank
Wall Street Reform and Consumer Protection Act (the “Dodd-
Frank Act”). e Dodd-Frank Act creates a comprehensive new
regulatory regime governing the OTC and listed derivatives
markets and their participants by requiring, among other things:
centralized clearing of standardized derivatives (with certain stated
exceptions); the trading of clearable derivatives on swap execution
facilities or exchanges; and registration and comprehensive
regulation of new categories of market participants as “swap
dealers” and swap “introducing brokers.” e Dodd-Frank Act
grants regulatory authorities such as the CFTC and the SEC
broad rule-making authority to implement various provisions of
the Dodd-Frank Act, including comprehensive regulation of the
OTC derivatives market. ese regulators have exercised, and will
continue to exercise, their expanded rule-making powers in ways
that will a ect how we conduct our business. At this point, it is
unclear whether they will exercise their expanded supervisory and
enforcement powers in a manner that would adversely a ect us.
Based upon regulations nalized to date, we anticipate that one
or more of our subsidiaries will be subject to registration under
the Dodd-Frank Act. Registration will impose substantial new
requirements upon these entities, including, among other things,
capital and margin requirements, business conduct standards and
record keeping and data reporting obligations. Increased regulatory
oversight could also impose administrative burdens on us related
to, among other things, responding to regulatory examinations
or investigations. e legislation and implementing regulations
may not only a ect us, but also many of our customers and
counterparties. e increased costs associated with compliance,
and the changes that will be required in our OTC and clearing
businesses, may adversely impact our results of operations, cash
ows, and/or nancial condition. Although the original date set
for completion of nal rules was mid-July 2011, the CFTC has
announced that it will phase in its new rules through at least
March 31, 2013. Because many of the rules that the CFTC and
the SEC are required to promulgate are not yet nal, we cannot
predict with any degree of certainty how our business will be
a ected. e Company will continue to monitor all applicable
developments in the implementation of the Dodd-Frank Act.
Failure to comply with current or future legislation or regulations
that apply to our operations could subject us to nes, penalties,
or material restrictions on our business in the future.
e USA PATRIOT Act contains anti-money laundering and
nancial transparency laws and mandates the implementation
of various regulations applicable to broker-dealers and other
nancial services companies. e USA PATRIOT Act seeks to
promote cooperation among nancial institutions, regulators
and law enforcement entities in identifying parties that may
be involved in terrorism or money laundering. Anti-money
laundering laws outside of the U.S. contain similar provisions.
We believe that we have implemented, and that we maintain,
appropriate internal practices, procedures and controls to enable
us to comply with the provisions of the USA PATRIOT Act and
other anti-money laundering laws.
e U.S. maintains various economic sanctions programs
administered by the U.S. Treasury Department’s O ce of
Foreign Assets Control (“OFAC”). e OFAC administered
sanctions take many forms, but generally prohibit or restrict
trade and investment in and with sanctions targets; and in
some cases require blocking of the target’s assets. Violations
of any of the OFAC-administered sanctions are punishable by
civil nes, as well as criminal nes and imprisonment. We have
established policies and procedures designed to comply with
applicable OFAC requirements. Although we believe that our
policies and procedures are e ective, there can be no assurance
that our policies and procedures will e ectively prevent us from
violating the OFAC-administered sanctions in every transaction
in which we may engage.