Regulatory Alerts2007-04-20
Added
Application of the Customer Identification Program Rule to Future Commission Merchants Operating as Executing and Clearing Brokers in Give-Up Arrangements
The customer identification program rule does not apply to a futures commission merchant operating solely as an executing broker in a give-up arrangement because such an entity does not establish a formal relationship with the customer. The executing broker merely facilitates trades for a fee without accepting margin, maintaining daily transaction records, or issuing confirmations, whereas the clearing broker establishes the formal relationship. Although exempt from the customer identification program rule in this specific capacity, the futures commission merchant must maintain an anti-money laundering program with risk-based policies to assess, monitor, and mitigate money laundering risks associated with its execution brokerage activities.