The Safety of ADMIS Customer Funds
To all ADM Investor Services Brokers and Clients, February 28, 2012
As President of ADM Investor Services, Inc. (ADMIS), I have no greater responsibility than to ensure the funds customers entrust to our firm are maintained in a safe and secure manner. It is a responsibility that I take with the utmost gravity and care. This letter details the multiple levels of processes and safeguards that are in place at ADMIS to protect and secure customer funds.
First and foremost, customer assets are segregated into separate and secure bank accounts and are not, under any circumstances, used by ADMIS for its own purposes. ADMIS’ two primary exchange clearing banks are Bank of Montreal (Harris Bank) and JP Morgan Chase Bank. They, along with the CME Group and Intercontinental Exchange, hold the majority of ADMIS’ customer segregated assets.
The ADMIS Treasury and Accounting staffs are well trained and equipped to ensure that our customer funds are fully segregated and maintained in complete compliance with our industry’s regulations. Staff maintains proper separation of duties and has multiple layers of review and management oversight in the daily verification of the segregation of these funds. This process is monitored by auditors from independent public accountants, industry regulators and our parent company Archer Daniels Midland (NYSE:ADM). As a wholly owned subsidiary of ADM - a publicly traded Fortune 50 company - and as an active participant in a highly regulated environment, ADMIS’ accounting practices are reviewed through the following audits:
- Independent auditors Ernst & Young, conduct a certified audit each fiscal year as of June 30th. This includes testing of internal controls and a review of our financial practices. Their most recent audit report can be found on our website at www.admis.com/AboutUs/Financials.
- The CME Group is ADMIS’ designated self-regulatory organization (DSRO). As such, they conduct an in-depth, unannounced annual audit of ADMIS’ financial, risk management and compliance practices to verify we are in compliance with the Commodity Exchange Act and all Exchange and industry regulations.
- The Commodity Futures Trading Commission (CFTC), the futures industry regulator recently verified that ADMIS’ customer funds are properly segregated and secure.
- The Internal Audit department of ADM reviews ADMIS’ strict compliance with Sarbanes-Oxley 404 regulations, as well as Information Technology internal controls and other ADM policies.
ADMIS customer segregated assets are conservatively invested in accordance with CFTC Rule 1.25 and ADM’s Corporate Investment Policy. As of February 24, 2012, ADMIS segregated customer assets are invested as follows:
- 72% in U.S. Treasury Bills, Treasury Notes or overnight repos backed by U.S. Treasuries
- 16% in cash equivalent deposits
- 12% in Triple A rated money market funds backed by large parent corporations
These assets are not only subject to our cautious internal investment policies, they must also pass an added macro-level layer of oversight by our parent company. ADM monitors ADMIS’ investment decisions and counter-party risk exposure, and helps ensure our portfolio maintains a risk-averse position.
ADMIS does not engage in proprietary trading which means we do not put our balance sheet at risk from potential proprietary trading losses. Our focus is solely on servicing our customer business and our income is derived from executing and clearing trades, and making prudent, cautious investments.
The goal of sharing this information is to give you a transparent view of ADMIS’ financial practices. If you have any questions, please feel free to contact me directly at 312.242.7126 or Thomas.Kadlec@admis.com. I would be happy to discuss ADMIS’ investments, policies or any other concerns you may have and I welcome your call.
Thomas R. Kadlec
President's Update - November 18, 2011
As I reported in the November 1st Presidents Update, ADMIS has always had – and continues to have – great financial strength and stability. You can view this letter, along with all the latest developments on the MF Global situation, in the special information section of our website www.admis.com/mfglobal.
The most significant event of this past week is the second phase of a disbursement process; the Trustee filed an expedited motion requesting the Court to approve an interim distribution to MF Global’s “cash-only” customers equal to 60% of those customers’ cash balances. The court approved this interim distribution on November 17, 2011. This means that approximately $520 million will be released to the 23,000 customers who had money – but no positions – in their accounts at MF Global. We expect the distribution of money to begin on November 21st, and recognize this as an important step toward the goal of returning the customer property that has been frozen during the bankruptcy process.
In addition to these recent developments, our industry is stepping up efforts to verify compliance with the regulations that are in place to protect investors, and thereby strengthen confidence in the futures industry and its systems. To that end, the CFTC is conducting unannounced audits of clearing firms to ensure that they are in full compliance with their requirement to segregate customer’s funds. As I write this, CFTC auditors are in our offices performing one of these “spot checks” of ADMIS’ accounts. We welcome this independent review of our books, and are confident they will find that our customer funds are properly segregated and our equity capital is secure.
While the industry focuses on these important audit measures, ADMIS’ continues to provide our clients with the same high levels of customer service, financial strength and business integrity they have always received from us. Our clients know:
- We are a firm that specializes in executing and clearing trades, and provided clients with market information and related services. ADMIS does not engage in proprietary trading, nor do our employees personally trade. Our business activities remain squarely focused on supporting the success of our clients.
- As a wholly owned subsidiary of the Archer Daniels Midland Company (NYSE:ADM), we are part of a Fortune 50 company with 30,000 employees around the globe. The relationship with our parent company not only supports our firm’s financial strength and stability, it extends beyond finances to include our vision and integrity. The vision of our parent company permeates through all of ADM’s people and business entities around the globe. It is “To be the most admired agribusiness company in the world by creating value, growing responsibly and serving vital needs.”
That vision calls each of us to earn and keep the admiration of investors, colleagues, peers, partners, clients and everyone with whom we do business. It is “The ADM Way.” I am privileged to be part of an organization whose vision and core values steer its people to act with integrity and honor, and to serve its clients well, no matter how challenging the times.
Please feel free to explore our web site, or contact me or any of our employees with questions. Although I will be traveling on business over the next week, I will have access to my email account and I welcome your inquiry.
Nov 29 MF Global Trustee Notice on Funds
Trustee Notice! MF Global Customer Claim Forms
CME Group Increases SIPC guarantee to $550 million
November 17, 2011: Reuters: MF Global Customers to get long sought $520 million
November 11, 2011: CME Group and CME Trust to Provide $300M Guarantee to SIPC Trustee to Help Facilitate Release of Customer-Segregated Funds
Update from the President - November 10, 2011
As events surrounding the MF Global financial crisis continue to unfold, I would like to provide an update on the situation, and once again reassure clients about the strength, financial stability and business focus of ADM Investor Services (ADMIS).
Over the last week, the MF Global (MFG) bankruptcy trustee directed positions and a portion of the corresponding margin balances that were at MFG to be transferred to other futures brokerage firms, including ADMIS. Our staff has worked diligently to ensure that the transfer of accounts to ADMIS has been handled as smoothly as possible, and we welcome these clients and look forward to providing them with excellent services and great financial strength. These clients have many questions and concerns about the transfer of their assets, and we are doing all we can to assist them through this difficult situation. While the events of the past two weeks are deeply troubling and unprecedented, we remain confident that in time all matters related to MFG’s bankruptcy will be resolved and customer confidence in the futures industry will be restored.
Information on the MFG situation is changing daily, so we have created a page on our website that contains updated information, links to related sites, and Frequently Asked Questions and Answers. Please check www.admis.com/mfglobal regularly for factual information.
As we wait for more facts to emerge, please allow me to provide some big picture perspective on the world of financial services. Many of the events that are happening in financial markets, both at home and around the globe, are not within our control. There are, however, some things you – and any investor in these uncertain times – can do right now to help bring clarity to your own situation. First and foremost, be sure that the financial partners you choose are strong, stable and have the staying power to walk with you long into the future. The checkpoints below can help you better understand those with whom you do business and build confidence for the steps ahead:
- Know the firm with whom you are dealing. How long have they been in business? What is the ownership and financial backing of the firm?
- Understand their business activities, such as whether or not they engage in proprietary trading of their own money, which could put the firm’s finances at risk.
- Understand the firm’s balance sheet and capital. Selected financial data for all major FCM’s is available on the CFTC’s website www.cftc.gov/MarketReports/FinancialDataforFCMs/index.htm
I welcome you to explore these questions, and any others you may have, with ADMIS. You will learn we do not engage in proprietary trading, and that we are the wholly owned subsidiary of the Archer Daniels Midland Company (NYSE:ADM) a Fortune 50 agricultural processing giant. Our financial strength was described in detail in my letter of November 1, 2011, which is available below.
The focus of ADMIS business is squarely on helping our clients be successful. We remain steadfast in our commitment to our clients, and to operating a financially secure and stable brokerage firm that they can rely on long into the future. Please feel free to explore our website, or contact me or any of our employees with questions. I can be reached at 312.242.7126 or Tom.Kadlec@admis.com, and I welcome your inquiry.
President, ADM Investor Services
ADMIS' Strong Financial Standing - November 1, 2011
Given recent events surrounding MF Global's financial crisis, customers have asked for reassurance regarding ADM Investor Services' (ADMIS) financial stability. ADMIS has always had — and continues to have — a very strong balance sheet. ADMIS is a firm built on financial stability, and it is this strength that enables us to withstand marketplace fluctuations with ease. We are strong, well-capitalized and prepared to continue navigating uncertain times.
- Our independent auditors, Ernst & Young, conduct a very thorough certified annual audit of our firm after each fiscal year ends on June 30th. Their most recent audit confirmed that ADM Investor Services' equity capital was $231 million as of June 30, 2011.
- Although ADMIS does not typically release quarterly updates of our equity capital throughout the year, these are extraordinary circumstances. As of September 30, 2011, ADMIS has $234 million in equity capital.
- Based on CFTC regulations, ADMIS is required to maintain $2.7 billion in a segregated account to secure our customer's funds. As of September 30, 2011, we have $583 million above and beyond this required number, or 22% in excess of the amount we are required to maintain.
- CME Group, Inc., our designated futures industry regulator, conducts an unannounced annual audit to ensure we are in compliance with all CFTC regulations. The audit reviews ADMIS Compliance, Financial and Risk Management practices and procedures to conform with industry regulations.
- The internal audit department of Archer Daniels Midland Company also conducts an annual, unannounced audit of ADMIS to ensure we are in full compliance with Sarbanes-Oxley 404 regulations, which govern internal controls over financial reporting.
Rest assured that ADMIS has always been, and continues to be, committed to providing excellent service as well as strong financial stability to all our clients.
President, ADM Investor Services
Frequently Asked Questions & Answers as of November 8, 2011
Q: When will all customer positions show on their activity statements?
A: Most US Exchanges transferred the remaining positions over the past weekend; therefore the November 7th statement should reflect most, if not all, of their positions traded on US markets. Please note there are some positions still pending transfer from ICE US and NYSE Liffe. The communication flow from foreign markets has been less informative, especially out of the European and Asian Exchanges. ADMIS will work diligently with all Exchanges to ensure such transfer of positions is completed soon as possible.
Q: When will I have access to my money?
A: Access to funds rests in the hands of the MF Global Bankruptcy Trustee. The trustee is regularly updating information on their website, www.mfglobaltrustee.com.
Q: My ADMIS statement reflects a different trade price on my position.
A: Positions at MFG were transferred by the Exchange at the 11/2/2011 end-of-day settlement price. ADMIS’ activity statements will only reflect the difference from the 11/2/2011 settlement price to top days’ settlement price. The profit or loss from the actual trade price to the 11/2/2011 settlement price will be reflected as cash in your customer’s account and will be credited to their account when the remaining funds are transferred from MFG.
Q: What margin rates will ADMIS charge (speculative and hedge)?
A: ADMIS’ standard practice is to charge the applicable exchange’s minimum initial & maintenance margin rates. Hedge rates are available to those customers that complete and file a hedge letter with ADMIS; this letter should list the specific product(s) for which the customer uses to hedge risk(s) associated with their business.
Q: How do margin rates differ from MF Global?
A: Generally, ADMIS margin excesses (or deficiencies) are computed by taking the account’s Total Equity (TE) plus the margin value (MV) of any securities on deposit (i.e. T-Bills) less the Initial Requirement (FIR). This method contrasts with the system brokers may be accustomed to at MF Global where the account’s Net Liquidating Value (NLV) less the Initial Requirement (FIR) was used. The key difference in these approaches lies in where the net option value is being attributed, whether that be on the liability component (margin requirement) as at ADMIS or the asset component (liquidating value) as at MF Global.
Q: How do I open a new customer account?
A: New Account Applications are available via hard copy or pdf. You may request these documents by emailing email@example.com or calling 312-242-7150. ADMIS also has an online account application link which is available upon request.
Q: When will we have access to customer accounts online?
A: Access to customer accounts can be obtained by contacting ADMIS Support Desk at firstname.lastname@example.org in order to receive a username and password for the member website.
Q: How can I get access to online account information?
A: Access to online account information can be obtained by contacting ADMIS Support Desk at email@example.com.
Q: When will we have access to a trading platform?
A: Access to a trading platform can be obtained by contacting ADMIS Support Desk at firstname.lastname@example.org.
Q: What platforms will I have access to?
A: ADMIS has its own proprietary trading platform called OAK; access to CQG, TT, and PATS is also available upon request.
Q: What are the costs for using the order entry platforms?
A: There is no fee to use the Oak Trading Platform, and standard industry rates apply for use of platforms outside of OAK. The ADMIS Support Desk can provide these costs to you which are based on the service levels selected.
Q: When will I be trained on the Oak trading platform?
A: OAK training can be scheduled by contacting Matt King at (312) 242-7262 or emailing Matt at email@example.com.
Q: When does ADMIS credit deposits to customer accounts?
A: ADMIS’ standard practice for electronic deposits (i.e. wires) is to credit the customer’s account on the day the funds are received into the ADMIS bank account. Check deposits are credited to the customer’s account on the day that the funds are deposited into the ADMIS bank account.
Q: How do I know when customer funds are received by ADMIS?
A: A daily account statement is generated and sent to each customer that has any activity in their account; such statements can either be sent via hard copy or email. Online access to the account is also available by contacting ADMIS Support Desk at firstname.lastname@example.org.