14 Sep


By / bintoromover

Clearing Agreement Finra

Many netting and port agreements (clearing agreements) require the IPO company to deposit money with the clearing house (clearing deposits) in order to cover any obligations that may arise from the release of the importing company`s accounts (e.B.g. unsecured expense balances of the customer). These clearing deposits are usually held by the clearing house for the duration of the clearing agreement and are usually returned to the importing company within a short period of time after the termination of the clearing agreement, provided that the importing company does not have obligations to the clearing company that it would not otherwise be able to fulfil. The interpretative guidelines in this Communication cover the period during which an importing entity may consider its netting deposit as an eligible asset for net capital purposes after the termination of the netting agreement. This Communication provides interpretive advice known to employees of the Transactions and Markets Division of the Securities and Exchange Commission with respect to deposit clearing: the language cited above is voluntary on behalf of the clearing house. In order for an importing entity party to a netting agreement with a termination penalty to treat its set-off deposit as an eligible asset for net capital purposes, it is necessary to amend its netting agreement before 2 January 2009 to include the above language. The clearing house may provide the additional language either in an amended netting agreement or in an addendum to an existing netting agreement. In response, we argued that the assignment was not effective because FINRA had not approved it and that, therefore, the existing netting agreement remained in effect, but the clearing house remained stubborn. In fact, the clearing house was so tenacious that it limited my client`s clients to liquidating trades for only two full trading days, while we did. Because of the potential right of pledge of the IPO`s compensation contribution, where that company is subject to the adoption of a protection order under the Securities Investor Protection Act of 1970, while the termination clause is still in force, the importing company must be required to provide all cash and/or securities clearing deposits held by its clearing broker dealer, within the limits of the termination fine, unless the netting agreement contains the following language: These termination clauses have raised questions about the clearing company`s rights to the compensation contribution of an importing company subject to an early repayment penalty if the importing company is subject to a protection order under the Securities Investor Protection Act of 1970. The question also arises as to how the importing enterprise should consider such clauses in relation to its net capital calculation.

The SEC`s interpretation of the Securities Exchange Act (SEA) Rule 15c3-1 provides that a set-off deposit may be considered an authorized asset, provided that the netting agreement explicitly specifies that the contribution will be returned to the importing company within 30 calendar days of termination of the agreement. The SEC`s interpretation also requires that a written agreement on introductory broker owner accounts (PAIB) has been concluded between the clearing and importer companies. . . .



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