CFTC Staff Provides Guidance On Separate Accounts

In a no-action letter, the CFTC Division of Swap Dealer and Intermediary Oversight ("SDIO") and Division of Clearing and Risk ("DCR") provided guidance on the treatment of separate accounts of a single beneficial owner by futures commission merchants ("FCMs").

The CFTC advisory on CFTC Rule 1.56 ("Prohibition of guarantees against loss") provided guidance on the appropriate documentation required within customer agreements and the processing of margin withdrawals. The letter states that FCMs must retain the ability to access funds in the other accounts of a beneficial owner (including those under different control) to meet margin requirements when the customer is in financial distress. The letter also clarifies that FCM customer agreements or other documents cannot (i) prevent an FCM from calling the beneficial owner of an account for required margin, (ii) obstruct the FCM from initiating legal proceedings to recover any losses should the beneficial owner fail to