INTL FCStone 2013 Annual Report Download - page 30

INTLFCSTONEINC.Form10K 9
PART I
ITEM1Business
e Financial Conduct Authority (“FCA”), the regulator of the
nancial services industry in the United Kingdom, regulates
our subsidiary, INTL FCStone Ltd., as a Financial Services
Firm under part IV of the Financial Services and Markets Act
2000. e regulations impose daily regulatory capital, as well
as conduct of business, governance, and other requirements.
e conduct of business rules include those that govern the
treatment of client money and other assets which, under certain
circumstances for certain classes of clients must be segregated
from the rm’s own assets.
On July 21, 2010, the President signed the Dodd-Frank Wall Street
Reform and Consumer Protection Act (the “Dodd-Frank Act”).
e Dodd-Frank Act created 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.” We registered our subsidiary, INTL
FCStone Markets, LLC, as a swap dealer on December 31,
2012. Most of the rules aecting this business are now nal,
and external business conduct rules came into eect on May 1,
2013. Nevertheless, some important rules, such as those setting
capital and margin requirements, have not been nalized or fully
implemented, and it is too early to predict with any degree of
certainty how we will be aected. We will continue to monitor
all applicable developments in the implementation of the Dodd-
Frank Act. e legislation and implementing regulations aect
not only us, but also many of our customers and counterparties.
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, criminal nes, and imprisonment. We 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.
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.
e FCA regulates INTL FCStone Ltd. and INTL Global
Currencies Limited. Each is 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 ensure the nancial integrity and
liquidity of broker-dealers. ey establish 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 us. ey
also restrict the ability of INTL FCStone Securities to expand
its business beyond a certain point without 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.