7.3.5.5. Maintenance of Minimum Net Capital Requirement
Any FCM or independent introducing broker who knows or should have known that its adjusted net capital is less than the required minimum must immediately notify the CFTC and NFA or, if it is a securities broker-dealer, with the SEC and FINRA. The notification must include a discussion of how the event originated and what steps the FCM is taking to address the situation.
Introducing brokers must file their notification with the NFA and any other relevant SRO and with every futures commission merchant that carries its customer accounts. It, too, must provide information as to how the event came about and what steps it is taking to remedy it. Notification by either an FCM or IB must provide documentation that adequately reflects its capital condition on the date that its adjusted net capital fell below the minimum.
FCMs must file notice to the NFA no later than 24 hours after discovering their adjusted net capital is less than the greatest of:
• 150% of the minimum dollar amount of $1 million
• 110% of the FCM’s risk-based capital requirement
• 150% of adjusted net capital as required by any futures association of which it is a member
To enter into a guarantee agreement with an introducing broker, an FCM must file three successive monthly statements where its adjusted net capital equals or exceeds these amounts.
CFTC Regulation 1.12
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SUMMARY TABLE Net Capital Requirements |
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CFTC |
National Futures Association |
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Futures commission merchant |
Must maintain adjusted net capital equal to or greater than the greatest of the following: • $1 million • Its risk-based capital requirement • The adjusted net capital | |