INTL FCStone 2012 Annual Report Download - page 35
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Please find page 35 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 19
PART I
ITEM 1A Risk Factors
of our technology relating to trade execution, trade reporting,
surveillance, record keeping and data reporting obligations,
compliance and back-up and disaster recovery plans designed
to meet the requirements of the regulators.
Changes that will be required in our OTC and clearing businesses
may adversely impact our results of operations. Following the
adoption of the Dodd-Frank Act and related rules the markets
for cleared and non-cleared swaps may be less robust, there may
be less volume and liquidity in these markets and there may be
less demand for our services. Certain banks and other institutions
will be limited in their conduct of proprietary trading and will be
further limited or prohibited from trading in certain derivatives.
e new rules, including the restrictions on the trading activities
for certain banks and large institutions, could materially impact
transaction volumes and liquidity in these markets and our
revenues would be adversely impacted as a result.
Changes that will be required in our OTC and clearing businesses
may also adversely impact our cash ows and nancial condition.
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.
We currently expect to register our subsidiary, INTL Hanley
LLC, as a swap dealer on December 31, 2012. e legislation
and implementing regulations may not only a ect us, but also
certain of our customers and counterparties.
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 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.
We are subject to net capital requirements.
e SEC, FINRA and various other regulatory agencies require
our broker-dealer subsidiaries, INTL FCStone Securities Inc.
and FCC Investments, Inc. to maintain speci c levels of net
capital. Failure to maintain the required net capital may subject
these subsidiaries to suspension or revocation of registration
by the SEC and suspension or expulsion by FINRA and other
regulatory bodies.
e CFTC and various other self-regulatory organizations require
our futures commission merchant subsidiary, FCStone, LLC, to
maintain speci c levels of net capital. Failure to maintain the
required net capital may subject this subsidiary to limitations on
its activities, including suspension or revocation of its registration
by the CFTC and suspension or expulsion by the NFA and
various exchanges of which it is a member.
Ultimately, any failure to meet capital requirements by our
securities broker-dealer subsidiaries or our FCM subsidiary could
result in liquidation of the subsidiary. Failure to comply with the
net capital rules could have material and adverse consequences
such as limiting their operations, or restricting the Company
from withdrawing capital from these subsidiaries.
In addition, a change in the net capital rules, the imposition of
new rules or any unusually large charge against net capital could
limit our operations that require the intensive use of capital.
ey could also restrict our ability to withdraw capital from
these subsidiaries. Any limitation on our ability to withdraw
capital could limit our ability to pay cash dividends, repay debt
and repurchase shares of our outstanding stock. A signi cant
operating loss or any unusually large charge against net capital
could adversely a ect our ability to expand or even maintain our
present levels of business, which could have a material adverse
e ect on our business, nancial condition and operating results.
We are subject to margin funding requirements
on short notice.
Our business involves establishment and carrying of substantial
open positions for customers on futures exchanges and in the
OTC derivatives markets. We are required to post and maintain
margin or credit support for these positions. Although we collect
margin or other deposits from our customers for these positions,
signi cant adverse price movements can occur which will require
us to post margin or other deposits on short notice, whether or
not we are able to collect additional margin or credit support
from our customers. We maintain borrowing facilities for the
purpose of funding margin and credit support and have systems
to endeavor to collect margin and other deposits from customers
on a same-day basis, there can be no assurance that these facilities
and systems will be adequate to eliminate the risk of margin calls
in the event of severe adverse price movements a ecting open
positions of our customers. Generally, if a customer is unable
to meet its margin call, we promptly liquidate the customer’s
account. However, there can be no assurance that in each case
the liquidation of the account will not result in a loss to us or
that liquidation will be feasible, given market conditions, size
of the account and tenor of the positions.