A week ago, I posted a screen-shot of the INDEMNITY AGREEMENT which CME Group, the broker domiciled in Trinidad and Tobago, requires in order to open accounts for U.S. residents. I said in that post that I like the Agreement CME Group has put forward, and I think that all offshore brokers should use a similar agreement in order to be in compliance with the rules and regulations of the U.S. Nanny State.
Here is some additional information regarding the law this Agreement is designed to comply with.
CME Group refers to the law as CFR Part 240 Rule 15a-6
The full designation should be:
17 CFR 240.15a-6 Exemption of certain foreign brokers or dealers
Here’s what the letters and numbers mean, followed by a copy-and-paste of the relevant portion.
CFR stands for Code of Federal Regulations. The Code is divided into 50 “titles”, which are further subdivided into parts, sections and paragraphs. In the part of the law of interest to us, here’s what the numbers designate:
17 designates the title – Commodity and Securities Exchanges
240 designates the part
15 designates the section
a-6 designates the paragraph
Regarding offshore brokers and their U.S. clients, the operative sentence appears at the very beginning of paragraph a-6. It says:
§ 240.15a-6 Exemption of certain foreign brokers or dealers.
(a) A foreign broker or dealer shall be exempt from the registration requirements of sections 15(a)(1) or 15B(a)(1) of the Act to the extent that the foreign broker or dealer:
(1) Effects transactions in securities with or for persons that have not been solicited by the foreign broker or dealer; or…
In the case of offshore forex brokers, the exemption referred to above is exemption from the CFTC requirement for registration as an RFED (Retail Foreign Exchange Dealer).
The legalese that follows the word “or” doesn’t pertain to us, as individual, retail traders – and you probably don’t want to waste your time wading through it. However, if you insist on having a go at it, here it is, as reprinted by the Legal Information Institute at Cornell University.
And, for more information on the CFR, here is the Wikipedia article: