“Netting risk” is the risk that firms' netting arrangements with their customers may be susceptible to challenge by a liquidator in the event of customer default, with the result that the liquidator could be entitled to claim and realise customers' profitable transactions for the benefit of creditors while leaving the firm to claim for the gross amount of the losses on unprofitable transactions in the liquidation. Effective netting arrangements, on the other hand, mean that a firm may net off profitable and losing transactions against each other, thereby limiting their loss in the event of a default.

As a result, the FOA, with the support of a number of firms, developed a Master Netting Agreement (MNA) and secured positive legal opinions from key jurisdictions around the world. The Financial Services Authority requires Netting Agreements to be supported by positive legal opinions in order to comply with its rules. Each firm (legal entity) must be able to demonstrate that legal opinions have been commissioned specifically for that firm, or that it is a part of an acceptable “pool” arrangement such as that run by the FOA.

As part of our agreement with the FSA, the FOA submits a list of all jurisdictions covered by the library and all firms with access to those jurisdictions on a six monthly basis. The FSA is then able to check this list when firms rely on the FOA opinions to meet regulatory requirements in order to ensure that the firms have access to the necessary jurisdictional opinions.

• Master Netting Agreement
• Phase 1 opinions (accessible only to subscribers)
• Phase 2 opinions (accessible only to subscribers)
• Jurisdictional coverage and accessing the library