Alert May 03, 2011

OCC Issues Notice of Proposed Rulemaking on Retail Foreign Exchange Transactions

The OCC issued a notice of proposed rulemaking (the “ NPR“) concerning off-exchange transactions in foreign currency.  A Dodd-Frank Act amendment to the Commodity Exchange Act provides that a U.S. depository institution with a federal regulator may not engage in retail foreign exchange (“forex”) transactions unless it acts pursuant to a rule or regulation adopted by its primary federal regulator allowing such transactions.  The OCC has issued the NPR to, if adopted, provide such a rule for national banks, their operating subsidiaries and branches and agencies of foreign banks (collectively, “National Banks”).  The NPR would authorize National Banks to engage in certain off-exchange forex transactions with retail customers.  The NPR also describes disclosure, recordkeeping, capital, margin, reporting to customers and other compliance requirements that a National Bank would be required to meet in order to engage in retail forex transactions.  The OCC further states that a National Bank engaging in retail forex transactions in accordance with the OCC’s final retail forex rule will also be expected to comply, when dealing with retail forex transactions, with the requirements of the Interagency Policy Statement on Retail Sales of Nondeposit Investment Products to the extent those requirements do not conflict with the requirements of the OCC’s final retail forex rule.  Comments on the NPR are due to the OCC by May 23, 2011.