The National Futures Association has proposed an interpretive notice requiring futures commission merchants (FCMs) that offer or recommend sweep accounts to make certain disclosures to their clients. The notice does not prescribe the disclosure language, but notes that FCMs should make the disclosures at the time a sweep account program is offered to a customer and requires each FCM to obtain the customer’s written consent prior to any funds being transferred pursuant to such program.

Under the new notice, FCMs should (i) identify for their customers the entity maintaining the sweep account; (ii) determine whether that entity is subject to regulation; and (iii) disclose any material terms and conditions, risks and features of the sweep account program. In addition, FCMs should advise customers of any potential conflicts of interest in connection with the sweep account program and should inform customers of the consequences of transferring monies from the FCM’s regulated customer accounts in the event that the entity maintaining the sweep account files for bankruptcy.

http://www.nfa.futures.org/news/newsRuleSubLetter.asp?ArticleID=1771