INTL FCStone 2012 Annual Report Download - page 26
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Please find page 26 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.Form10K10
PART I
ITEM 1 Business
Net Capital Requirements
FCStone, LLC is subject to minimum capital requirements under
Section 4(f)(b) of the Commodity Exchange Act and Part 1.17
of the rules and regulations of the CFTC. ese rules specify the
minimum amount of capital that must be available to support
our clients’ open trading positions, including the amount of
assets that FCStone, LLC must maintain in relatively liquid
form, and are designed to measure general nancial integrity and
liquidity. Net capital and the related net capital requirement may
uctuate on a daily basis. Compliance with minimum capital
requirements may limit our operations if we cannot maintain
the required levels of capital. Moreover, any change in these rules
or the imposition of new rules a ecting the scope, coverage,
calculation or amount of capital we are required to maintain
could restrict our ability to operate our business and adversely
a ect our operations.
INTL FCStone (Europe) and INTL Global Currencies Limited
are regulated by the Financial Services Authority, the regulator
of the nancial services industry in the United Kingdom, and
each subject to a net capital requirement.
INTL FCStone Securities is subject to the SEC Uniform Net
Capital Rule 15c3-1 under the Securities Exchange Act of 1934.
ese requirements are intended to ensure the nancial integrity
and liquidity of broker-dealers. ey establish both minimum
levels of capital and liquid assets. e net capital requirements
restrict the payments of dividends, redemption of stock, the
prepayment of subordinated indebtedness and the making of
any unsecured advances or loans to any stockholder, employee
or a liate, if such payment would reduce the broker-dealer’s net
capital below required levels. e net capital requirements restrict
the ability of INTL FCStone Securities to make distributions to
the Company. ey also restrict the ability of INTL FCStone
Securities to expand its business beyond a certain point without
the introduction of additional capital.
FCC Investments, Inc., a broker-dealer subsidiary, is subject
to the net capital requirements of the SEC relating to liquidity
and net capital levels.
FCStone Australia Pty, Ltd (“ FCStone Australia” ) is regulated
by the Australian Securities and Investment Commission and
is subject to a net tangible asset capital requirement. FCStone
Australia is also regulated by the New Zealand Clearing Limited,
and is subject to a capital adequacy requirement.
FCStone Commodity Services (Europe), Ltd. is domiciled in
Ireland and subject to regulation by the Financial Regulator of
Ireland, and is subject to a net capital requirement.
INTL FCStone DTVM Ltda. (“ INTL FCStone DTVM” ) is a
registered broker-dealer and regulated by the Brazilian Central
Bank and Securities and Exchange Commission of Brazil, and is
subject to a capital adequacy requirement of $0.7 million. e
recently acquired INTL FCStone DTVM, a shell company with
no signi cant operations, had net capital lower than the minimum
required amount by less than $0.1 million as of September 30,
2012. e Company expects to remediate this shortfall in net
capital of INTL FCStone DTVM for the semi-annual regulatory
ling prepared as of December 31, 2012.
Certain other non-U.S. subsidiaries of the Company are also
subject to capital adequacy requirements promulgated by
authorities of the countries in which they operate.
Excluding INTL FCStone DTVM, all other subsidiaries of the
Company are in compliance with all of their capital regulatory
requirements as of September30, 2012 . Additional information
on these net capital and minimum net capital requirements can be
found within Note 12 to the Consolidated Financial Statements.
Segregated Customer Assets
FCStone, LLC maintains customer segregated deposits from its
customers relating to their trading of futures and options-on-
futures on U.S. commodities exchanges held with FCStone, LLC.
As such, it is subject to CFTC regulation 1.20, which speci es that
such funds must be held in segregation and not commingled with
the rm’s own assets. FCStone, LLC maintains acknowledgment
letters from each depository at which it maintains customer
segregated deposits in which the depository acknowledges the
nature of funds on deposit in the account. In addition, CFTC
regulations require that a daily segregation calculation is performed
which compares the assets held in customers segregated depositories
(“ segregated assets” ) to the rm’s total segregated assets held on
deposit from customers (“ segregated liabilities” ). e amount of
customer segregated assets must be in excess of the segregated
liabilities owed to customers and any shortfall in such assets must
be immediately communicated to the CFTC. As of September30,
2012 , FCStone, LLC maintained $45.0 million in segregated
assets in excess of its segregated liabilities.
In addition, FCStone, LLC is subject to CFTC regulation 1.25,
which governs the acceptable investment of customer segregated
assets. is regulation allows for the investment of customer
segregated assets in readily marketable instruments including U.S.
Treasury securities, municipal securities, government sponsored
enterprise securities, certi cates of deposit, commercial paper,
corporate notes or bonds, general obligations of a sovereign
nation, interest in money market mutual funds, and repurchase
transactions with a liated entities in otherwise allowable securities.
FCStone, LLC predominately invests its customer segregated