Overview

Derivatives Compliance provides regulatory compliance and consulting services to those individuals and organizations that have customers that reside in the United States and/or operate in the United States either as introducing brokers, solicitors or managers of exchange traded commodity futures and retail over-the-counter foreign currency ("forex") contracts. We can assist such individuals and organizations in the CFTC and NFA registration process as Introducing Brokers (IBs), Commodity Trading Advisors (CTAs), and Commodity Pool Operators (CPOs) and implement the proper compliance programs needed to maintain compliancy with CFTC and NFA rules and regulations.

Our goal is to help our clients circumnavigate the ever changing and complex regulatory landscape, engage in industry best practices and avoid common regulatory pitfalls by having the proper regulatory compliance guidance and framework in place.

Benefits of Our Compliance Services

We specialize in effectively assessing your regulatory compliance risks and needs and advises you on industry best practices in order to maintain proper CFTC and NFA compliant controls. Without these proper compliance controls, your firm could be potentially subject to CFTC enforcement actions, penalties and fines, including permanent bars against your firm and/or individuals within your firm, an opportunity cost that cannot be replaced.

• Independent Controls - Regulators often view independent third-party compliance controls as more effective methods of maintaining compliance as internal management can turn a “blind eye” to many compliance problems or do not have the resources and understanding to address the various compliance challenges an organization may face



• Liaison - By acting as a liaison between your organization and CFTC and NFA regulators, we can ensure that you address any compliance issues properly and safely. Our consultants are in regular and frequent contact with industry regulators and attorneys so our clients are always up to date on the latest regulatory rules and regulations.



• Time to Market – Gathering an understanding of CFTC and NFA compliance rules and regulations is a daunting and, not to mention, time consuming task. Our regulatory compliance services focus on allowing our clients do what they do best by allowing them to focus on their core competencies



• Expertise - Our consultants have spent many years developing compliance controls, not just as consultants, but in actual business applications, as compliance officers, accountants and industry executives of CFTC registered and NFA member firms. As brokers and managers themselves, our consultants are in frequent contact with industry regulators and have endured numerous successful audits. Therefore, we can offer fast and reliable compliance solutions without having to constantly research rules and regulations.



• Confidentiality - Maintaining strict confidentially is imperative to our business relationship as a deep and intimate understanding of your business model and operations is the key to developing the proper customized compliance programs for your organization. Without this trust, a successful implementation cannot be achieved. Therefore, we apply extremely rigid ethics and guidelines on our representatives to protect and safeguard any information you provide us.



• Affordable Since our consultants have many years of practice in real life business applications as compliance officers, we are able to offer our regulatory compliance services at a fraction of what it costs to engage legal counsel directly. In some cases and upon special requests by our clients, we can submit our compliance documents to our outside counsel for final review and approval. We provide services to its clients on an hourly or project basis or via a upfront retainer. Please contact us for more information on pricing.

Forex Compliance and Registration

Our Forex Compliance division specializes in providing guidance to both on and off-shore organizations that offer over-the-counter foreign currency (forex) products to US retail clients and/or operate on-shore and offer such products to US and/or Non-US retail clients. The new retail forex rules to be enacted by the CFTC on October 18, 2010 were implemented to protect US retail forex customers and govern retail forex brokers and managers that operate or maintain offices in the US.

** Please note that many firms are attempting to setup offshore entities that have with contracts with various US or Non-US liquidity providers and counterparties, while maintaining operations inside of the US. We believe that the new CFTC forex ruling has closed these loop holes and these entities operating offices here in the US (regardless of whether or not their customers reside in the US or not) will be required to be registered in that they are benefitting direct (or indirectly) from a retail forex customer's transactions.

Forex Registration

Depending on the complexity of your organization, the registration process with the CFTC and NFA can take from to 3 to 6 months to complete. Our Forex Compliance division can provide forex introducers, solicitors, advisors, managers and hedge funds with assistance in the following registration categories:

• Forex Introducing Brokers (IB)
• Forex Commodity Trading Advisors (CTAs)
• Forex Commodity Pool Operators (CPOs)

As a general rule, those those individuals or organizations: (a) introducing customer accounts and collecting transaction-based commissions would need to seek the IB registration category, (b) managing customer accounts on a discretionary (managed account) basis and collecting advisory fees would need to seek the CTA registration category, and (c) operating a commodity futures hedge fund or fund of hedge funds (FoF) and collecting advisory fees would need seek the CPO registration category.

** Please note that when determining the proper registration category, please note that the CFTC and the NFA makes a clear distinction between brokers and advisors. Typically, brokers collect commissions in connection with introducing accounts and advisors collect advisory fees in connection with advising accounts. However, if you are registered as CTA or CPO, you may collect commissions from retail Forex customers only if it is incidental to your business. In other words, if you are a CTA or CPO, you can only collect transaction-based commissions from retail Forex customer if you also charge that same customer advisory fees. If you collect commissions only, then you are deemed to be a broker and will be required to register as an IB.

Forex Compliance

Forex Compliance Document Preparation - We can prepare and review the various compliance documents needed to maintain CFTC and NFA compliance, including, customized compliance manuals, customer account opening documents, disclosure documents, private placement memorandums and subordinated loan agreements. Please note that preparation of PPM, Subscription and LP Agreements must be done in conjunction with outside counsel.

Forex Compliance Outsourcing - We believe our most value add service is compliance outsourcing as our forex registration and compliance document preparation services are only initial programs meant to get the Forex IB, CTA or CPO started. Once you are operational, the most important tasks and challenges lie ahead, ongoing forex compliance. With our forex compliance outsourcing services, you can utilize outsourcing services as a full-service compliance solution or as a "à la-carte" type service

IMPORTANT NOTICE REGARDING OCTOBER 18, 2010 DEADLINE: Please note there may be significant delays in processing your application due to an influx of applications for forex registrations. Once your application has been submitted to the NFA, the registration process can take anywhere from 3 to 6 months and can take longer if you are not prepared. If you are required to be registered and have not done so by such date, you will not be permitted to conduct any retail forex business. Contact us as soon as possible so that we can ensure that your firm does not experience any unnecessary delays.

Futures Compliance and Registration

Our Futures Compliance division specializes in providing guidance organizations that offer exchange traded commodity futures products to its clients. From start-up to tenure organizations, we work with various clients in many different stages of their business lifecycle to provide commodity futures registration, compliance document preparation and compliance outsourcing services.

Our target clients include domestic and foreign organizations transacting in commodities as well as small and large introducing brokers, asset managers, investment advisors, hedge fund managers and trading systems providers who engage in such transactions on behalf of their customers.

Futures Registration

Our Futures Compliance division can provide futuresregistration assistance in the following registration categories:

• Futures Introducing Brokers (IB)
• Futures Commodity Trading Advisors (CTAs)
• Futures Commodity Pool Operators (CPOs)

Futures Compliance

Given that “one size does not fit all”, each organization is unique and requires customized compliance solutions. Our consultants will work closely with you to learn and understand your business model and develop a tailor made forex compliance solution that fits your organization’s needs. We provide the following types of compliance services:

• Initial and Ongoing Compliance Outsouring
• Compliance Manuals for IBs, Forex Managers, CTAs, CPOs and Forex Hedge Funds
• Supplemental Customer Account Opening Documents for IBs
• Disclosure Documents for CTAs and Forex Managers
• Private Placement Memorandum for Forex Hedge Funds and CPOs (Reviews)

News

Subject: CFTC Releases Final Rules Regarding Retail Forex Transactions
Release Date: August 30, 2010

Washington, D.C. – The U.S. Commodity Futures Trading Commission (CFTC) today announced the publication in the Federal Register of final regulations concerning off-exchange retail foreign currency transactions. The rules implement provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Food, Conservation, and Energy Act of 2008, which, together, provide the CFTC with broad authority to register and regulate entities wishing to serve as counterparties to, or to intermediate, retail foreign exchange (forex) transactions.

“These rules of the road will help protect the American public in the largest area of retail fraud that the CFTC oversees: retail foreign exchange,” CFTC Chairman Gary Gensler said. “All CFTC registrants involved in soliciting and selling retail forex contracts to consumers will now have to comply with rules to protect the investing public. This is also the first final rule that the Commission has published to implement the Dodd-Frank Wall Street Reform and Consumer Protection Act. We look forward to publishing additional rules to protect the American public.”

The final forex rules put in place requirements for, among other things, registration, disclosure, recordkeeping, financial reporting, minimum capital and other business conduct and operational standards. Specifically, the regulations require the registration of counterparties offering retail foreign currency contracts as either futures commission merchants (FCMs) or retail foreign exchange dealers (RFEDs), a new category of registrant. Persons who solicit orders, exercise discretionary trading authority or operate pools with respect to retail forex also will be required to register, either as introducing brokers, commodity trading advisors, commodity pool operators (as appropriate) or as associated persons of such entities. “Otherwise regulated” entities, such as United States financial institutions and SEC-registered brokers or dealers, remain able to serve as counterparties in such transactions under the oversight of their primary regulators.

The final rules include financial requirements designed to ensure the financial integrity of firms engaging in retail forex transactions and robust customer protections. For example, FCMs and RFEDs are required to maintain net capital of $20 million plus 5 percent of the amount, if any, by which liabilities to retail forex customers exceed $10 million. Leverage in retail forex customer accounts will be subject to a security deposit requirement to be set by the National Futures Association within limits provided by the Commission. All retail forex counterparties and intermediaries will be required to distribute forex-specific risk disclosure statements to customers and comply with comprehensive recordkeeping and reporting requirements.

The final rules become effective October 18, 2010.

For questions and answers regarding final retail foreign exchange rule, download: Final Forex Rules

Last Updated: August 30, 2010

Contact Us

Derivatives Compliance Consultants, Inc
815-A Brazos Street, Suite 265
Austin, TX 78701
Tel: +1 512-692-6145
Fax: +1 512 697 0046

Sales

Contact our representatives to learn more about our forex regulatory compliance services. sales@derivativescompliance.org

General Information

Contact us to get general information or to provide us with feedback so that we can better serve our clients. info@derivativescompliance.org

Recruiting

Contact our human resources department and learn more about job openings at Derivatives Compliance. jobs@derivativescompliance.org

IMPORTANT NOTICE REGARDING OCTOBER 18, 2010 DEADLINE: Please note there may be significant delays in processing your application due to an influx of applications for forex registrations. Once your application has been submitted to the NFA, the registration process can take anywhere from 3 to 6 months and can take longer if you are not prepared. If you are required to be registered and have not done so by such date, you will not be permitted to conduct any retail forex business. Contact us as soon as possible so that we can ensure that your firm does not experience any unnecessary delays.

Request Info

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