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The CFTC and NFA Issue No-Action Relief to FCMs and Introducing Brokers in Calculating Net Capital After Receiving of Covered PPP Loans under the CARES Act

On April 23, 2020, the CFTC announced a targeted no-action relief to certain market participants from compliance with net capital treatment of covered loans received under the Paycheck Protection Program (PPP) pursuant to the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).[1]  The Division of Swap Dealer and Intermediary Oversight (DSIO) issued the no-action letter to permit eligible futures commission merchants (FCMs) and introducing brokers (IBs) taking advantage of covered PPP loans to add back to its capital certain amounts under the loans that are forgivable in accordance with Regulation 1.17.[2]  DSIO Director Joshua B. Sterling emphasize that “a key priority for the CFTC [is] to ensure that markets remain orderly and liquid in the current environment.”  The NFA joined the CFTC and provided similar no-action to FCM and IB members that are in compliance with the terms of the CFTC’s no-action relief.  This aligns the CFTC/NFA’s approach to PPP loans with that of FINRA, especially for registrants that are jointly regulated as broker-dealers and FCMS or IBs.[3]  We previously addressed FINRA’s guidance to firms on net capital treatment of PPP loans.[4]

DSIO is granting targeted no-action relief against any FCM or IB that receives a PPP covered loan and, in computing its net capital pursuant to CFTC Regulation 1.17, adds back to its capital the eligible Forgivable Expense Amount.  Generally, PPP loans are eligible for debt forgiveness in an amount equal to express costs incurred, and payments made, during the eight-week period following the origination date of the PPP loan, which constitute “Forgivable Expenses Amounts” (i.e., certain payroll, mortgage interest, rent and utility payments) .  Regulation 1.17 requires registered entities to maintain minimum net capital levels.  FCMs and IBs that receive a loan issued under the PPP on its balance sheet may add back to its net capital the Forgivable Expense Amount subject to the following conditions:

  • The covered loan is included as a liability on the FCM or IB balance sheet
  • The FCM or IB creates and maintains documentation of the add-back basis
  • The add-back amount does not exceed the balance sheet liability for the covered loan expected to be forgiven
  • The add-back amount is reported on the registrant’s Form 1FR or FOCUS Report

On April 24, 2020, the NFA issued no-action relief to any FCM or IB members from similar NFA net capital treatment requirements provided that members comply with the terms of the CFTC’s April 22, 2020 no-action letter.  In addition, NFA is permitting relief to any FCM or IB that is an SEC registered broker-dealer and qualifies as a small firm (under FINRA By-laws) to add back to its capital, when computing adjusted net capital under CFTC Regulation 1.17, the amount of any accrued and unpaid FINRA 2020 annual assessments permitted to be deferred by FINRA’s guidance.


[1]   CFTC Release No. 8156-20 (Apr. 23, 2020) available at

[2]   CFTC Letter No. 20-15 (Apr. 22, 2020).

[3]   NFA Notice to Members 1-20-19 (Apr. 23, 2020) available at

[4]   See Mintz Insight on FINRA guidance on net capital treatment (Apr. 17, 2020) available at


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Therese M. Doherty

Member / Co-Chair, Financial Services Practice

Therese M. Doherty is a Mintz litigator who develops creative strategies to drive successful outcomes for clients. The Legal 500 United States consistently ranks her as one of the nation's top securities lawyers. Therese has a national reputation for defending clients in government investigations.

Jason Burrell