Frequently Asked Question regarding Customer Identification Programs for Futures Commission Merchants and Introducing Brokers (31 CFR 103.123)

Financial Crimes Enforcement Network

Commodity Futures Trading Commission

Guidance

FIN-2006-G004

Issued: February 14, 2006

Subject: Frequently Asked Question regarding Customer Identification Programs for

Futures Commission Merchants and Introducing Brokers (31 CFR 103.123)

Q. Futures commission merchants engage in transactions through omnibus accounts and sub-

accounts established by financial intermediaries. In these situations, (1) the omnibus account or

relationship is established by or on behalf of a financial intermediary for the purpose of

executing transactions that will clear or settle at another financial institution, or the omnibus

accountholder provides limited information to the futures commission merchant solely for the

purpose of delivering assets to the custody account of the beneficial owner at another financial

institution; (2) the limited information given to the futures commission merchant about the

beneficial owner is used primarily to assist the financial intermediary with recordkeeping or to

establish sub-accounts that hold positions for a limited duration to facilitate the transfer of assets

to another financial institution; (3) all transactions in the omnibus account or sub-accounts at the

futures commission merchant are initiated by the financial intermediary; and (4) the beneficial

owner has no direct control over the omnibus account or sub-accounts at the futures commission

merchant. In the circumstances described above, must the futures commission merchant treat the

beneficial owners as "customers" for purposes of the rule?

A. No

e omnibus account or sub-accounts at the

futures commission merchant are initiated by the financial intermediary; and (4) the beneficial

owner has no direct control over the omnibus account or sub-accounts at the futures commission

merchant. In the circumstances described above, must the futures commission merchant treat the

beneficial owners as "customers" for purposes of the rule?

A. No. In paragraph (a)(5) of the rule, a "customer" is defined as "[a] person that opens a new

account.” According to the rule's preamble (68 FR 25149 (May 9, 2003)), this means the

"person identified as the account holder.” The preamble states further that "[i]f the intermediary

is the account holder, such as in the case of an omnibus account, an FCM is not required to look

through the intermediary to the underlying beneficiaries." Even if the futures commission

merchant has some information about a beneficial owner of assets in an omnibus account (e.g.,

batch execution account) or a sub-account, under the circumstances described above, the

financial intermediary (not the beneficial owner) should be treated as the customer for purposes

of the rule.