INTL FCStone 2014 Annual Report Download - page 25

INTL FCSTONE INC.  Form 10K 9
PART I
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.” Our wholly owned subsidiary, INTL
FCStone Markets, LLC, is registered as a swap dealer. Most of the
rules affecting this business are now final, and external business
conduct rules came into effect on May 1, 2013. Nevertheless,
some important rules, such as those setting capital and margin
requirements, have not been finalized or fully implemented,
and it is too early to predict with any degree of certainty how
we will be affected. We will continue to monitor all applicable
developments in the implementation of the Dodd-Frank Act.
e legislation and implementing regulations affect 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 fines, penalties, or
material restrictions on our business in the future.
e USA PATRIOT Act contains anti-money laundering and
financial transparency laws and mandates the implementation
of various regulations applicable to broker-dealers and other
financial services companies. e USA PATRIOT Act seeks to
promote cooperation among financial 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 Office 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 fines, criminal
fines, and imprisonment. We established policies and procedures
designed to comply with applicable OFAC requirements. Although
we believe that our policies and procedures are effective, there can
be no assurance that our policies and procedures will effectively
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 financial integrity and liquidity.
Net capital and the related net capital requirement may fluctuate
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 affecting the scope, coverage, calculation or amount
of capital we are required to maintain could restrict our ability to
operate our business and adversely affect our operations.
INTL FCStone Ltd, a Financial Services Firm regulated by the
FCA is subject to a daily 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 financial 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 affiliate,
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.
e Australian Securities and Investment Commission regulates
FCStone Australia Pty, Ltd (“FCStone Australia”). It is subject to
a net tangible asset capital requirement. New Zealand Clearing
Limited, also regulates FCStone Australia. It is subject to a capital
adequacy requirement.
The Brazilian Central Bank and Securities and Exchange
Commission of Brazil regulates INTL FCStone DTVM Ltda.
(“INTL FCStone DTVM”). It is a registered broker-dealer and
is subject to a capital adequacy requirement.
e Comision Nacional de Valores regulates Gainvest S.A.
Sociedad Gerente de FCI and INTL CIBSA S.A. and they are
subject to net capital and capital adequacy requirements. e
Rosario Futures Exchange and the General Inspector of Justice
regulate INTL Capital, S.A. It is subject to a capital adequacy
requirement.
Certain of our other non-U.S. subsidiaries are also subject to
capital adequacy requirements promulgated by authorities of
the countries in which they operate.
All of our subsidiaries are in compliance with all of their capital
regulatory requirements as of September 30, 2014. Additional
information on these net capital and minimum net capital
requirements can be found in Note 12 to the Consolidated
Financial Statements.
ITEM 1 Business