INTL FCStone 2012 Annual Report Download - page 34
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Please find page 34 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.Form10K18
PART I
ITEM 1A Risk Factors
customers and regulatory investigations and sanctions, including
by the CFTC, which require that our trade execution and
communications systems be able to handle anticipated present
and future peak trading volumes. Any such degradation or failure
could also have a negative e ect on our reputation, which in
turn could cause us to lose existing customers to our competitors
or make it more di cult for us to attract new customers in the
future. Further, any nancial loss that we su er as a result of such
degradations or failures could be magni ed by price movements
of contracts involved in transactions impacted by the degradation
or failure, and we may be unable to take corrective action to
mitigate any losses we su er.
We are subject to extensive government
regulation.
e securities and commodities futures industries are subject
to extensive regulation under federal, state and foreign laws.
In addition, the SEC, the CFTC, FINRA, the NFA, the CME
Group and other self-regulatory organizations, commonly
referred to as SROs, state securities commissions, and foreign
securities regulators require compliance with their respective
rules and regulations. ese regulatory bodies are responsible for
safeguarding the integrity of the nancial markets and protecting
the interests of participants in those markets.
As participants in various nancial markets, we may be subject to
regulation concerning certain aspects of our business, including:
•trade practices;
•the way we communicate with, and disclose risks to clients;
• nancial and reporting requirements and practices;
•
client identi cation and anti-money laundering requirements;
•capital structure;
•record retention; and
•the conduct of our directors, o cers and employees.
Failure to comply with any of these laws, rules or regulations could
result in adverse consequences. We and certain of our o cers and
employees have, in the past, been subject to claims arising from
acts in contravention of these laws, rules and regulations. ese
claims have resulted in the payment of nes and settlements.
It is possible that we and our o cers and other employees will,
in the future, be subject to similar claims. An adverse ruling
against us or our o cers and other employees could result in
our or our o cers and other employees being required to pay a
substantial ne or settlement and could result in a suspension
or revocation of required registrations or memberships. Such
sanctions could have a material adverse e ect on our business,
nancial condition and operating results.
e regulatory environment in which we operate is subject to
change, particularly in light of the October 31, 2011 bankruptcy
ling of MF Global and actions taken by the CFTC on July 10,
2012 to freeze assets of Peregrine Financial Group, a futures
commission merchant. Both matters resulted from potential
de ciencies in customer segregated futures accounts. New or
revised legislation or regulations, including the Dodd-Frank Act
and any potential increased regulation over customer segregated
deposits, imposed by the SEC, the CFTC, other United States
or foreign governmental regulatory authorities, SROs or FINRA
could have a material adverse e ect on our business, nancial
condition and operating results. Changes in the interpretation
or enforcement of existing laws and rules by these governmental
authorities, SROs and FINRA could also have a material adverse
e ect on our business, nancial condition and operating results.
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.
Additional regulation, changes in existing laws and rules, or
changes in interpretations or enforcement of existing laws and
rules often directly a ect securities rms. We cannot predict
what e ect any such changes might have. Our business, nancial
condition and operating results may be materially a ected by
both regulations that are directly applicable to us and regulations
of general application. Our level of trading and market-making
activities can be a ected not only by such legislation or regulations
of general applicability, but also by industry-speci c legislation
or regulations.
Due to the passage of the Dodd-Frank Wall
Street Reform and Consumer Protection Act,
we will incur signi cant additional operational
and compliance costs, our revenues may be lower
than in the past and our nancial condition and
results of operations may be adversely a ected.
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 in time, it is
unclear whether they will exercise their expanded supervisory and
enforcement powers in a manner that would adversely a ect us.
ere will be signi cant costs to prepare for and comply with
these on-going regulatory requirements. We have incurred,
and will continue to incur, increased costs, including legal fees,
personnel expenses and other costs associated with compliance
with the Dodd-Frank Act. ere will also continue to be signi cant
costs related to the development, operation and enhancement