Regulatory Requirements and Subsidiary Dividend Restrictions

12 Months Ended

Sep. 30, 2020

Capital and Other Regulatory Requirements [Abstract]

Regulatory Requirements and Subsidiary Dividend Restrictions

Regulatory Requirements and Subsidiary Dividend Restrictions

The Company’s subsidiary StoneX Financial is registered as a broker dealer and member of the Financial Industry Regulatory Authority (“FINRA”) subject to the SEC Uniform Net Capital Rule 15c3-1, which requires the maintenance of minimum net capital. StoneX Financial is also a futures commission merchant registered with the CFTC and subject to the net capital requirements of the CFTC Regulation 1.17. Under the more restrictive of these rules, StoneX Financial is required to maintain “adjusted net capital”, equivalent to the greater of $1,000,000 or 8 percent of client and non-client risk maintenance margin requirements on all positions, as defined in such rules, regulations, and requirements. Adjusted net capital and the related net capital requirement may fluctuate on a daily basis. StoneX Financial also has a restriction on dividends, which restricts the withdrawal of equity capital if the planned withdrawal would reduce net capital, subsequent to haircuts and charges, to an amount less than 120% of the greatest minimum requirement.

The Company’s subsidiary Gain Capital Group, LLC is subject to regulation by the CFTC and NFA and is required to maintain specific levels of regulatory capital. As a futures commission merchant and retail foreign exchange dealer, Gain Capital Group, LLC is required to maintain adjusted net capital of the greater of $1.0 million or 8% of customer and non-customer risk maintenance margin, or $20.0 million plus 5.0% of the amount of retail customer liabilities over $10.0 million, plus 10% of all liabilities owed to eligible contract participant counterparties acting as a dealer that are not an affiliate.

StoneX Financial as a registered securities carrying broker dealer is also subject to Rule 15c3-3 of the Securities Exchange Act of 1934 (“Rule 15c3-3”), which requires the Company to maintain separate accounts for the benefit of securities clients and

proprietary accounts of broker dealers (“PABs”). These client protection rules require the Company to maintain special reserve bank accounts (“SRBAs”) for the exclusive benefit of securities clients and PABs. As of September 30, 2020, StoneX Financial prepared reserve computations for the client accounts and PAB accounts in accordance with the customer reserve computation guidelines set forth in Rule 15c3-3. Based upon these computations, the customer reserve requirement was $18.5 million as of September 30, 2020. The Company held $17.3 million in the customer SRBA as of September 30, 2020 and made additional deposits of $6.2 million on October 2, 2020, to meet the customer segregation and segregated deposit timing requirements of Rule 15c3-3. The PAB reserve requirement was $2.2 million as of September 30, 2020. The Company held $2.1 million in the PAB SRBA as of September 30, 2020, and made additional deposits of $1.1 million on October 2, 2020, to meet the PAB segregation and segregated deposit timing requirements of Rule 15c3-3.

Pursuant to the requirements of the Commodity Exchange Act, funds deposited by clients of StoneX Financial and Gain Capital Group, LLC relating to their trading of futures and options on futures on a U.S. commodities exchange must be carried in separate accounts which are designated as segregated clients’ accounts. Pursuant to the requirements of the CFTC, funds deposited by clients of StoneX Financial and Gain Capital Group, LLC relating to their trading of futures and options on futures traded on, or subject to the rules of, a foreign board of trade must be carried in separate accounts in an amount sufficient to satisfy all of StoneX Financial’s and Gain Capital Group, LLC’s current obligations to clients trading foreign futures and foreign options on foreign commodity exchanges or boards of trade, which are designated as secured clients’ accounts. As of September 30, 2020, StoneX Financial had client segregated and client secured funds of $3,089.9 million and $162.6 million, respectively, compared to a minimum regulatory requirement of $3,030.6 million and $150.1 million, respectively. As of September 30, 2020, Gain Capital Group, LLC had client segregated and client secured funds of $340.4 million and $4.3 million, respectively, compared to a minimum regulatory requirement of $319.8 million and $2.5 million, respectively.

The Company’s subsidiaries StoneX Financial Ltd. and Gain Capital U.K. Ltd. are regulated by the Financial Conduct Authority (“FCA”), the regulator of the financial services industry in the U.K. The regulations impose regulatory capital, as well as conduct of business, governance, and other requirements. The conduct of business rules include those that govern the treatment of client money and other assets which under certain circumstances for certain classes of client must be segregated from the firm’s own assets. As of September 30, 2020, StoneX Financial Ltd. and Gain Capital U.K. Ltd. had client segregated funds of $516.5 million and $206.9 million, respectively, compared to a minimum regulatory requirement of $505.6 million and $205.6 million, respectively.

StoneX Financial Pte. Ltd. is regulated by the Monetary Authority of Singapore (“MAS”) and operates as an approved holder of a Capital Market Services License. StoneX Financial Pte. Ltd. is subject to the requirements of MAS and pursuant to the Securities and Futures Act. The regulations include those that govern the treatment of client money and other assets which under certain circumstances must be segregated from the firm’s own assets. As of September 30, 2020, StoneX Financial Pte. Ltd. had client segregated funds of $340.6 million compared to a minimum regulatory requirement of $338.9 million.

The following table details the Company’s subsidiaries with a minimum regulatory net capital requirement in excess of $5.0 million as well as the actual regulatory capital of the subsidiary as of September 30, 2020 (in millions):

Subsidiary	Regulatory Authority	Actual		Minimum Requirement
StoneX Financial Inc.	SEC and CFTC	$	229.8	$	137.6
StoneX Financial Ltd.	FCA	$	264.3	$	145.1
Gain Capital Group, LLC	CFTC	$	71.5	$	32.2
Gain Capital U.K. Ltd.	FCA	$	185.4	$	65.2

Certain other subsidiaries of the Company, each with a minimum requirement less than $5.0 million, are also subject to net capital requirements promulgated by authorities in the countries in which they operate. As of September 30, 2020, all of the Company’s subsidiaries were in compliance with their local regulatory requirements.