based on your research related to the regulatory requirements of futures contract risk exposure reporting, assess the adequacy of the reporting requirement. Indicate whether or not the public may be misled by management’s reporting of the financial risk related to these types of investments. Make a recommendation for improvement to the reporting requirements, indicating how this improvement will minimize risk for public users of the financial information.
The CFMA means Commodity Futures Modernization Act rules the working of the security futures. Under the Commodity Futures Modernization Act, the SEC and the CFTC means Commodity Futures Trading Commission will jointly regulate security futures. In addition to all this, FINRA, the NFA and One Chicago have regulatory responsibilities and authority over their members. These organizations are subject to Security exchange commission and Commodity Futures Trading Commission and we can say that there are other regulation for protection.
We can highlight the example,
Suppose any person hold security futures contracts in a particular securities account, Security exchange commission rules make a prohibition on the brokerage firm for making use of other person’s funds and securities to finance its own busine and because of this requirement the brokerage firm is required to keep aside funds equal to the netof all its excess payables to its customers
In some case brokerage firm may becomes insolvent, the SIPC protects cash and security futures held in a securities account. Most brokers who are registeredwith the SEC are SIPC members; and which are not registered then they should disclose the fact to their customers
