Published today in the Federal Register and on the website of the Commodity Futures Trading Commission are the new final rules on Enhancing Protections Afforded Customers and Customer Funds Held by Futures Commission Merchants and Derivatives Clearing Organizations.  See http://www.cftc.gov/LawRegulation/FederalRegister/FinalRules/2013-26665.

Approved by the Commission on October 30, 2013 and becoming effective on January 13, 2014, the new rules require “enhanced customer protections, risk management programs, internal monitoring and controls, capital and liquidity standards, customer disclosures, and auditing and examination programs for futures commission merchants.”   The Commission’s objective in adopting the new rules is to provide “greater assurances to market participants that: Customer segregated funds, secured amount funds, and cleared swaps funds are protected; … FCMs are monitoring and managing risks in a robust manner; [and] the capital and liquidity of FCMs are strengthened to safeguard their continued operations,” among others.

Several of the provisions focusing on enhanced protections for FCM customers stem from the recommendations made by James W. Giddens, the Securities Investor Protection Act Trustee for the Liquidation of the Business of MF Global Inc., and head of Hughes Hubbard’s Corporate Reorganization & Bankruptcy Group.  Mr. Giddens made the recommendations in his Investigation Report dated June 4, 2012, which was principally prepared by partners Jeff Coleman, Vilia Hayes and Sarah Cave, and in his testimony before the Senate Agriculture Committee on August 1, 2012.