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ence set forth in $ 1.16(b)(2) with respect to the registrant or applicant: Provided, however, That all information which is required to be furnished on and submitted with Form 1-FR is provided with such financial report, including a statement of the computation of the minimum capital requirements pursuant to $ 1.17: And, provided further, That the balance sheet is presented in a format as consistent as possible with the Form 1-FR and a reconciliation is provided reconciling such balance sheet to the statement of the computation of the minimum capital requirements pursuant to $ 1.17. Attached to each financial report filed pursuant to this paragraph (i) must be an oath or affirmation that to the best knowledge and belief of the individual making such oath or affirmation the information contained therein is true and correct. If the applicant or registrant is a sole proprietorship, then the oath or affirmation must be made by the proprietor; if a partnership, by a general partner; or if a corporation, by the chief executive officer or chief financial officer.

(j) Requirements for guarantee agreement. (1) A guarantee agreement filed pursuant to this section must be signed in a manner sufficient to be a binding guarantee under local law by an appropriate person on behalf of the futures commission merchant and the introducing broker, and each signature must be accompanied by evidence that the signatory is authorized to enter the agreement on behalf of the futures commission merchant or introducing broker and is such an appropriate person. For purposes of this paragraph (j), an appropriate person shall be the proprietor, if the firm is a sole proprietorship; a general partner, if the firm is a partnership; and either the chief executive officer or the chief financial officer, if the firm is a corporation.

(2) No futures commission merchant may enter into a guarantee agreement if:

(i) It knows or should have known that its adjusted net capital is less than the amount set forth in § 1.12(b); or

(ii) On or after the effective date of this paragraph (j), there is filed

against the futures commission merchant an adjudicatory proceeding brought by or before the Commission pursuant to the provisions of sections 6(b), 6(c), 60, 60, 8a, or 9 of the Act.

(3) A guarantee agreement filed in connection with an application for ini. tial registration as an introducing broker in accordance with the provisions of $ 3.15(a) of this chapter shall become effective upon the granting of registration to the introducing broker. A guarantee agreement filed other than in connection with an application for initial registration as an introducing broker shall become effective as of the date agreed to by the parties.

(4)(i) If the introducing broker fails to renew its registration, or if such registration is suspended, revoked, or withdrawn in accordance with the provisions of $ 3.33 of this chapter, the guarantee agreement shall expire as of the date of such failure, suspension, revocation or withdrawal.

(ii) If the futures commission merchant fails to renew its registration, or if such registration is suspended or revoked, the guarantee agreement shall expire 30 days after such failure, suspension or revocation, or at such earli. er time as may be approved by the Commission, the introducing broker, and the introducing broker's designated self-regulatory organization.

(5) A guarantee agreement may be terminated at any time during the term thereof:

(i) By mutual written consent of the parties, signed by an appropriate person on behalf of each party, with prompt written notice thereof, signed by an appropriate person on behalf of each party, to the Commission and to the designated self-regulatory organizations of the futures commission merchant and the introducing broker;

(ii) For good cause shown, by either party giving written notice of its intention to terminate the agreement, signed by an appropriate person, to the other party to the agreement, to the Commission, and to the designated self-regulatory organizations of the futures commission merchant and the introducing broker; or

(iii) By either party giving written notice of its intention to terminate the agreement, signed by an appropriate

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person, at least 30 days prior to the proposed termination date, to the other party to the agreement, to the Commission, and to the designated self-regulatory organizations of the futures commission merchant and the introducing broker.

(6) The termination of a guarantee agreement by a futures commission merchant or an introducing broker, or the expiration of such an agreement, shall not relieve either party from any liability or obligation arising from acts or omissions which occurred during the term of the agreement.

(7) An introducing broker may not simultaneously be a party to more than one guarantee agreement: Provided, however, That the provisions of this paragraph (j)(7) shall not be deemed to preclude an introducing broker from entering into a guarantee agreement with another futures commission merchant if the introducing broker or the futures commission merchant which is a party to the existing agreement has provided notice of termination of the existing agreement in accordance with the provisions of paragraph (j)(5) of this section, and the new guarantee agreement does not become effective until the day following the date of termination of the existing agreement: And, provided further, That the provisions of this paragraph (j)(7) shall not be deemed to preclude an introducing broker from entering into a guarantee agreement with another futures commission merchant if the futures commission merchant which is a party to the existing agreement ceases to remain registered and the existing agreement would therefore expire in accordance with the provisions of paragraph (j)(4)(ii) of this section.

(8)(i) An introducing broker which is a party to a guarantee agreement which has been terminated in accordance with the provisions of paragraph (j)(5) of this section, or which is due to expire in accordance with the provisions of paragraph (j)(4)(ii) of this section, must cease doing business as an introducing broker on or before the effective date of such termination or expiration unless, on or before 10 days prior to the effective date of such termination or expiration or such other

period of time as the Commission and the designated self-regulatory organization may allow for good cause shown, the introducing broker files with its designated self-regulatory organization either new guarantee agreement effective as of the day fol. lowing the date of termination of the existing agreement, or, in the case of a guarantee agreement which is due to expire in accordance with the provisions of paragraph (j)(4)(ii) of this section, a new guarantee agreement effective on or before such expiration, or a Form 1-FR. If the introducing broker files such Form 1-FR, the introducing broker must also file a Form 1-FR, certified by an independent public accountant, as of the day following the date of termination or expiration of the guarantee agreement. The Form 1-FR certified by an independent public accountant must be filed with the designated self-regulatory organization not more than 45 days after the date for which the report is made.

(ii) Notwithstanding the provisions of paragraph (j)(8)(i) of this section or of $ 1.17(a), an introducing broker which is a party to a guarantee agreement which has been terminated in accordance with the provisions of paragraph (j)(5)(ii) of this section shall not be deemed to be in violation of the minimum adjusted net capital requirement of $ 1.17(a) (1)(ii) or (2) for 30 days following such termination. Such

introducing broker must cease doing business as

introducing broker on or after the effective date of such termination, and may not resume doing business

introducing broker unless and until it files a new guarantee agreement or a Form 1-FR. If the introducing broker files a Form 1-FR, the introducing broker must also file a second Form 1-FR, certified by an independent public accountant, as of the day on which the first Form 1-FR is filed. The Form 1-FR certified by an independent public accountant must be filed with the designated selfregulatory organization not more than 45 days after the date for which the report is made. (The information collection requirements contained in $ 1.10 were approved by the Office of Management and Budget under

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control number 3038-0024; in paragraphs (a) and (b) under control number 3038-0023; and in paragraph (f) under control number 3038-0003.) (7 U.S.C. 60, 60, 6f, 6g, 7a, 12a, 19 and 21; 5 U.S.C. 552, 5 U.S.C. 552b, and secs. 2(a)(11), 4b, 4f, 4g, 5a, 8a, and 17 of the Commodity Exchange Act, 7 U.S.C. 4a(j), 6b, 68, 6g, 7a, 12a, and 21, as amended, 92 Stat. 865 et seq.; (7 U.S.C. 2, 4, 4a, 60, 6e, 6, 6k, 6m, 6n, 6p and 12a); secs. 2(a)(1), 40, 4d, 4e, 48, 4k, 4m, 4n, 4p, 8, 8a and 19 of the Commodity Exchange Act (7 U.S.C. 2 and 4, 6c, 60, 6e, 6f, 6k, 6m, 6n, 6p, 12, 12a and 23 (1982)); 5 U.S.C. 552 and 552b) (43 FR 39967, Sept. 8, 1978, as amended at 45 FR 2022, Jan. 10, 1980; 45 FR 80491, Dec. 5, 1980; 46 FR 63035, Dec. 30, 1981; 48 FR 35280, Aug. 3, 1983; 49 FR 39524, Oct. 9, 1984)

8 1.11 (Reserved]

within 24 hours after giving such notice file a statement of financial condition, a statement of the computa. tion of the minimum capital require ments pursuant to $ 1.17 (computed in accordance with the applicable capital rule), and a schedule of segregation requirements and funds on deposit in segregation, all as of the date such applicant's or registrant's adjusted net capital is less than the minimum required; or

(3) If the person is an introducing broker or applicant therefor, within 24 hours after giving such notice file a statement of financial condition and a statement of the computation of the minimum capital requirements pursuant to 1.17 (computed in accordance with the applicable capital rule) all as of the date such applicant's or registrant's adjusted net capital is less than the minimum required.

(b) Each person registered as a futures commission merchant, or who files an application for registration as a futures commission merchant, who knows or should have known that its adjusted net capital at any time is less

the greatest of: (1) 150 percent of the appropriate minimum dollar amount required by $ 1.17(a)(1)(i);

(2) 6 percent of the following amount: The customer funds required to be segregated pursuant to section 4d(2) of the Act and these regulations less the market value of commodity options purchased by option customers on or subject to the rules of a contract market, provided, however, the deduction for each option customer shall be limited to the amount of customer funds in such option customer's account; or,

(3) For securities brokers or dealers, the amount of net capital specified in Rule 17a-11(b) of the Securities and Exchange Commission (17 CFR 240.17a-11(b)) must file written notice to that effect as set forth in paragraph (g) of this section within five (5) business days of such event. Such applicant or registrant, must also file a Form 1-FR (or, if such applicant or registrant is registered with the Secu. rities and Exchange Commission as a securities broker or dealer, it may file, in accordance with $ 1.10(h), a copy of

8 1.12 Maintenance of minimum financial

requirements by futures commission

merchants and introducing brokers. (a) Each person registered as a futures commission merchant or who files an application for registration as a futures commission merchant, and each person registered as an introducing broker or who files an application for registration as introducing broker (except for an introducing broker or applicant for registration as an introducing broker operating pursuant to, or who has filed concurrently with its application for registration, a guarantee agreement and who is not also a securities broker or dealer), who knows or should have known that its adjusted net capital at any time is less than the minimum required by $ 1.17 or by the capital rule of any self-regulatory organization to which such person is subject, if any, must:

(1) Give telegraphic notice as set forth in paragraph (g) of this section that such applicant's or registrant's adjusted net capital is less than required by $ 1.17 or by such other capital rule, identifying the applicable capital rule. This notice must be given within 24 hours after such applicant or registrant knows or should have known that its adjusted net capital is less than is required by any of the aforesaid rules to which such applicant or registrant is subject; and

(2) If the person is a futures commission merchant or applicant therefor,

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its Financial and Operational Com- provided in paragraph (g) of this secbined Uniform Single Report under tion. the Securities Exchange Act of 1934, (f)(1) Whenever a clearing organizaPart II, in lieu of Form 1-FR) or such tion determines that any position it other financial statement designated carries for one of its clearing members by the National Futures Association, which is registered as a futures comin the case of an applicant, or by the

mission merchant or a leverage Commission or the designated self-reg- transaction merchant must be liquiulatory organization, if any, in the dated immediately, transferred immecase of a registrant, as of the close of diately or that the trading of any acbusiness for the month during which

count of such futures commission mersuch event takes place and as of the

chant or such leverage transaction close of business for each month

merchant shall be only for the purthereafter until three (3) successive poses of liquidation, because that months have elapsed during which the

clearing member has failed to meet a applicant's or registrant's adjusted net

call for margin or to make other recapital is at all times equal to or in

quired deposits, the clearing organizaexcess of the minimums set forth in tion must give telegraphic notice of this paragraph (b) which are applica

such a determination to the principal ble to such applicant or registrant.

office of the Commission at WashingEach financial statement required by

ton, D.C. within 24 hours. this paragraph (b) must be filed

(2) Whenever a registered futures within 30 calendar days after the end

commission merchant determines that of the month for which such report is

any position it carries for another regbeing made.

istered futures commission merchant

or for a registered leverage transaction (c) If an applicant or registrant at any time fails to make or keep current

merchant must be liquidated immedi

ately, transferred immediately or that the books and records required by

the trading of any account of such futhese regulations, such applicant or

tures commission merchant or leverregistrant must, on the same day such

age transaction merchant shall be event occurs, give telegraphic notice of such fact, specifying the books and

only for purposes of liquidation, be

cause the other futures commission records which have not been made or

merchant or the leverage transaction which are not current, and within 5

merchant has failed to meet a call for business days after giving such notice

margin or to make other required defile a written report stating what steps

posits, the carrying futures commishave been and are being taken to cor

sion merchant must give telegraphic rect the situation.

notice of such a determination to the (d) Whenever any applicant or regis principal office of the Commission at trant discovers or is notified by an in

Washington, D.C., within 24 hours. dependent public accountant, pursu- (g) Every notice and written report ant to $ 1.16(e)(2) of these regulations,

required to be given or filed by this of the existence of any material inad

section (except for notices required by equacy, as specified in $ 1.16(d)(2) of

paragraph (f) of this section) must be these regulations, such applicant or

filed with the regional office of the registrant must give telegraphic notice Commission nearest the principal of such material inadequacy within 3 place of business of the applicant or business days, and within 5 business

registrant (except that an applicant or days after giving such notice file a registrant under the jurisdiction of written report stating what steps have the Commission's Western Regional been and are being taken to correct Office must file such notices and rethe material inadequacy.

ports with the Southwestern Regional (e) Whenever any self-regulatory or- Office), with the designated self-reguganization learns that a member regis- latory organization, if any, with the trant has failed to file a notice or writ- Securities and Exchange Commission, ten report as required by this section, if such applicant or registration is a sesuch self-regulatory organization must curities broker or dealer, and with the immediately report such failure as National Futures Association, if the (2) An applicant may elect to file its the registrant that additional time is Form 1-FR for each calendar quarter required to analyze the request, in in lieu of each fiscal quarter by notify- which case the amount of time needed ing the National Futures Association will be specified. (See § 1.16(f) for exof its election, in writing, concurrently tension of the time for filing certified with the filing of the Form 1-FR pur- financial statements.) suant to paragraph (a)(2) of this sec- (2) In the event an applicant finds tion. A copy of such written notice that it cannot file its report for any must also be filed with the regional period within the time specified in office of the Commission nearest the paragraph (b)(4) of this section or principal place of business of the ap- § 1.12(b) without substantial undue plicant (except that an applicant hardship, it may file with the National under the jurisdiction of the Commis- Futures Association an application for sion's Western Regional Office must an extension of time to a specified file such a notice with the Commis- date which may not be more than 90 sion's Southwestern Regional Office). days after the date as of which the fiA registrant wishing to change such nancial statements were to have been election or to make such election filed. The application must state the other than concurrently with the reasons for the requested extension filing of the Form 1-FR pursuant to and must contain an agreement to file paragraph (a)(2) of this section may the report on or before the specified do so only if such change or election is date. The application must be received approved by the Commission upon by the National Futures Association written application to the principal before the time specified in paragraph office of the Commission in Washing- (b)(4) of this section or $ 1.12(b) for ton, D.C., and written notice of such filing the report. Notice of such applichange is given to the designated self- cation must be filed with the regional regulatory organization, if any.

office of the Commission nearest the (f) Extension of time for filing re- principal place of business of the apports. (1) In the event a registrant plicant (except that applicant finds that it cannot file its report for under the jurisdiction of the Commisany period within the time specified in sion's Western Regional Office must paragraphs (b)(1) or (b)(4) of this sec- file such a notice with the Commistion or $ 1.12(b) without substantial sion's Southwestern Regional Office) undue hardship, it may file with the concurrently with the filing of such principal office of the Commission in application with the National Futures Washington, D.C., an application for Association. Within ten calendar days an extension of time to a specified after receipt of the application for an date which may not be more than 90 extension of time, the National Fudays after the date as of which the fi- tures Association shall: (i) Notify the nancial statements were to have been applicant of the grant or denial of the filed. The application must state the requested extension; or (ii) indicate to reasons for the requested extension the applicant that additional time is and must contain an agreement to file required to analyze the request, in the report on or before the specified which case the amount of time needed date. The application must be received will be specified. by the Commission before the time (g) Nonpublic treatment of reports. specified in paragraphs (b)(1) or (b)(4) (1) All of the Forms 1-FR filed pursuof this section or $ 1.12(b) for filing ant to this section will be public: Prothe report. Notice of such application vided, however, That if the statement must be given to the designated self- of financial condition, the computaregulatory organization, if any, con- tion of the minimum capital require. currently with the filing of such appli- ments pursuant to $ 1.17, and the cation with the Commission. Within schedule (to be filed by a futures comten calendar days after receipt of the mission merchant only) of segregation application for an extension of time, requirements and funds on deposit in the Commission shall: (i) Notify the segregation are bound separately from registrant of the grant or denial of the the other financial statements (includrequested extension; or (ii) indicate to ing the statement of income (loss)),

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