Series 28 cheat sheet

FCM reporting: Form 1-FR-FCM is filed monthly and is due no later than the 17th business day after month-end; audited annual financial statements are due within 90 days after fiscal year-end.

IB reporting: Form 1-FR-IB is filed annually within 90 days after fiscal year-end.

Form 1-FR content: statement of financial condition, computation of adjusted net capital, and the Statement of Segregation Requirements and Funds in Segregated Accounts.

Rule 1.12: file immediate notice with the CFTC and the designated self-regulatory organization (DSRO) when adjusted net capital falls below the minimum, or below 120% of the minimum (early warning), accompanied by a current Form 1-FR.

Rule 1.46: the chief compliance officer's annual report is due within 90 days after fiscal year-end and must be certified by the CCO and filed with the CFTC and DSRO.

Rule 1.10 requires reports to be filed with the CFTC and DSRO and to be true and correct; a false statement or material omission in a financial report is a separate violation.

Rules 1.15 and 1.16: qualifying FCMs must keep risk assessment records and file risk assessment reports addressing market, credit, and other risk exposures.

Reports must be prepared in accordance with generally accepted accounting principles and the net capital rule; a segregation deficiency must be disclosed on the segregation schedule even if later cured.

FCM minimum adjusted net capital is the greatest of $1,000,000; 8% of the total risk margin requirement for positions carried in customer and noncustomer accounts; or the amount required by the DSRO.

IB minimum adjusted net capital is $45,000; a guaranteed introducing broker is exempt when an FCM's written guarantee covers all of its obligations.

Adjusted net capital = current assets minus total liabilities, minus prescribed haircuts, plus approved subordinated debt and equity capital.

Haircuts reduce the carrying value of securities by prescribed percentages; fixed assets, prepaid expenses, and unsecured receivables are deducted in full.

Subordinated debt counts as capital only under a written subordination agreement meeting Rule 1.17(h); the debt must be junior to customer and general creditor claims.

Rule 1.17(e) prohibits dividends, equity withdrawals, and unsecured advances that would reduce adjusted net capital below the minimum requirement or below 120% of it.

Current assets included in net capital must be readily convertible to cash within one year; assets failing that test are excluded.

Equity capital includes stock, paid-in capital, and retained earnings, reduced by intangible assets and any accumulated deficit.

Rule 1.20: customer money and securities must be segregated, separately accounted for, and held in an account titled 'Customer Segregated Account' at a bank, trust company, FCM, or derivatives clearing organization.

Rule 1.22: customer funds must be legally segregated as to beneficial ownership; funds of one customer may not be used to margin or carry the positions of another customer or of the firm.

Rule 1.26: at all times, funds in segregated accounts must equal or exceed the total net liquidating value of all customer accounts.

The segregation computation is prepared daily and retained as a required record; any deficiency must be covered and reported to the DSRO.

Rule 1.25 permitted investments: U.S. government and agency obligations, bank deposits and certificates of deposit, commercial paper, corporate notes, money market funds, and reverse repurchase agreements meeting rating, maturity, and issuer-concentration limits.

Rule 30.7: foreign futures and options customer funds are held in separate 30.7 accounts to cover the secured amount and may not be commingled with domestic customer segregated funds.

Residual interest is the firm's own funds held in the segregated account above the total customer requirement; NFA Financial Requirements Section 16 imposes a minimum residual interest.

Rule 1.32 requires written policies and procedures for the custody and control of customer funds, a monthly report to senior management, and notice to regulators of any segregation deficiency.

Rule 1.31: books and records must be retained for five years, with the first two years readily accessible for inspection by the CFTC and NFA.

Records must be complete and reproducible and produced on request; electronic storage is permitted if an audit trail prevents alteration.

Rule 1.35: every order and transaction must be recorded with account identification, terms, time of receipt, and time of execution.

Rule 1.37: customer account records must show name, address, principal occupation, and whether the customer is an associated person of the firm.

Required books and records include daily segregation computations, net capital computations, order tickets, confirmations, and customer statements.

Internal controls include written supervisory procedures under NFA Rule 2-9, segregation of duties, and periodic review by the chief compliance officer.

Rule 1.15 risk assessment records must be maintained and made available to the CFTC on request.

CFTC Rule 166.3: an FCM or IB must diligently supervise all commodity interest activities of its officers, employees, and agents, including branch offices and independent agents.

NFA Compliance Rule 2-9: maintain a written supervisory system, designate supervisors, and review the system at least annually to confirm it is current and effective.

Rule 1.33: an FCM must send a confirmation of each transaction and monthly statements showing open positions and the account's net liquidating value.

Rule 1.55: the CFTC risk disclosure statement must be furnished to the customer before the account is opened.

Rule 1.56: an FCM, IB, or associated person may not guarantee a customer against loss in a commodity interest account.

NFA Compliance Rule 2-30: members must obtain and update essential customer information and provide appropriate risk disclosure.

NFA Compliance Rule 2-29: communications with the public must be fair and balanced and not misleading; specified promotional material must be filed with NFA.

Section 4c(a) of the Commodity Exchange Act prohibits wash sales, fictitious transactions, and accommodation cross-trades between accounts.