In Regulatory Notice 07-58, the Financial Industry Regulatory Authority (FINRA) proposed guidelines for International Prime Brokerage. International Prime Brokerage is when a foreign domiciled customer (PB Customer) uses a foreign broker-dealer as its prime broker (FPB), and the FPB has an affiliate or correspondent relationship with a FINRA member (IPBC) to carry and clear trades of the PB Customers of the FPB that are executed by another FINRA member (EB). The proposed guidelines closely track the Securities and Exchange Commission January 25, 1994 prime broker no-action letter.
Among other things, the proposed guidelines recommend an omnibus cash account agreement between the FPB and IPBC for all trades of the PB Customers. The EB confirms trades through OmgeoTrade Suite/CNS Interface for Prime Brokers to the IPBC as well as sending an SEC Rule 10b-10 confirmation to the PB Customers. The IPBC should contract with EB along the lines set forth in SIFMA Form 150, and the EB and its PB customers should contract along the lines set forth in SIFMA Form 151. Agreements between the FPB and its PB Customers as well between the FPB and the IPBC are also recommended. The IPBC should have net capital of at least $1,500,000, and the EB or its clearing firm should have net capital of at least $1,000,000.