MF Global

SEC Chairman Mary Schapiro Stands By Agency’s 2011 Enforcement Record

Published on: March 15, 2012 | by Shepherd Smith Edwards & Kantas, LLP

Batting away criticism that many of the Security and Exchange Commission’s enforcement actions for fiscal year 2011 were actually follow-on administrative proceedings and not new actions, Chairman Mary Schapiro stood by the agency’s record. She also noted that in some instances, follow-ons are key to enforcing federal securities laws. Schapiro made her statements to a House Appropriations panel.

Per recent media findings, over 30% of the SEC’s FY 2011 735 enforcement actions (the agency has never filed this many in a fiscal year before) were follow-on administrative proceedings. Schapiro, who was testifying in front of the House Appropriations Financial Services Subcommittee on the White House’s proposed $1.566 billion FY2013 budget for the SEC, noted that some of the enforcement actions were the most complex to ever occur and included those involving municipal securities market-related bid rigging, misleading sales practices related to structured products, Foreign Corrupt Practices Act-related violations, and insider trading. She also pointed to the number of senior level people that have been the target of many of last year’s SEC enforcements.

Schapiro said that even as the SEC has already proposed or adopted regulations for over three-fourths of the duties it was tasked with under the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, the most challenging ones, including proposals to enhance disclosures for companies that use conflict minerals or pay governments for access to natural gas, minerals, and oil, are still on the horizon. So is the SEC’s joint proposal with banking regulators on the Volcker rule, which exempts insurance firms from proprietary trading restrictions while preventing financial institutions and affiliated insurers from being able to invest in private equity and hedge funds. She said stated the SEC is “rethinking” how it deals with its Volcker rulemaking.

Bankruptcy Judge Grants MF Global Permission to Use $21M from JPMorgan Chase

Published on: December 14, 2011 | by Shepherd Smith Edwards & Kantas, LLP

U.S. Bankruptcy Judge Martin Glenn says that MF Global Holdings Inc. can use approximately $21 million in cash collateral from JPMorgan Chase & Co, which is its mortgage lender. In issuing this decision, Glenn overruled customer objections that this money could be part of the $1.2B that has gone missing from their accounts. MF Global and JP Morgan have arrived at an agreement over how the cash will be used.

At the start of MF Global’s bankruptcy, JPMorgan had already consented to let the brokerage firm use $26M. This was per an agreement that would give the investment bank a lien on all MF Global assets.

It was just earlier this month that Glenn ruled that MF Global Inc. clients could recover 72% of what they lost when the broker-dealer filed for bankruptcy. Ruling against objections made by the brokerage firm’s creditors, he approved trustee James Giddens’ request. Per Glenn’s decision, MF Global’s clients can receive another $2.2 billion distribution, which lets them get back .72 on the dollar.

While the majority of the transfers were to go out within a few days, some were expected to take up to four weeks. In a separate decision, the Glenn approved transferring approximately 330 MF Global client securities accounts to Perrin, Holden & Davenport Capital Corp. MF Global has already moved approximately 38,000 commodities accounts to other financial firms.

Glen plans to tackle the issue of physical goods distribution, such as silver and gold bars, next month. Clients have complained about not being able to get their share of ownership of such items, which cannot be physically divided. HSBC Holdings Plc (HSBA) has even filed a lawsuit against Giddens. The financial firm is trying to determine whois the owner of the 15 silver bars and five gold bars underlying several Comex contracts between a client and MF Global.

Previous payouts to commodity clients are already at about $2 billion. However, some customers have said they didn’t receive any money from these initial payments.

In other MF Global-related news, CME Group has stopped issuing grants through its primary foundation in the wake of the brokerage firm’s bankruptcy filing. The Chicago-based commodities exchange had issued $22 million to Chicago-area schools and charities in the last five years. CME has said that it will continue to support charitable organizations through other corporate foundations and programs.

In November, CME said it would give ex- MF Global customers the $50 million that was held by CME Trust. Originally meant to assist traders, the trust had turned into a primary source of charitable giving for the exchange operator.

Exclusive: CME Trust’s charity grants halt on MF failure, Reuters, December 18, 2011

MF Global Wins Permission to Use JPMorgan’s Cash as Judge Suggests Probe, Bloomberg, December 14, 2011

MF Global clients get back 72 cents on the dollar, Bloomberg/Investment News, December 9, 2011

More Blog Posts:
$1.2 Billion of MF Global Inc.’s Clients Money Still Missing, Stockbroker Fraud Blog, December 10, 2011

MF Global Shortfall May Be More than $1.2B, Says Trustee, Stockbroker Fraud Blog, November 26, 2011

MF Global Holdings Ltd. Files for Bankruptcy While Its Broker Faces Liquidation and Securities Lawsuit by SIPC, Institutional Investor Securities Blog, October 31, 2011

$1.2 Billion of MF Global Inc.’s Clients Money Still Missing

Published on: December 10, 2011 | by Shepherd Smith Edwards & Kantas, LLP

According to the Commodity Futures Trading Commission, the whereabouts of $1.2M in MF Global Inc. customer funds are still unknown. Lawmakers at a Senate Banking Committee meeting grilled the CFTC officials earlier this week.

Speaking before the panel on Tuesday, CFTC Commissioner Jill Sommers said that the agency still has yet to find all the money. The CFTC began its investigation into MF Global’s collapse after holding company MF Global Holding filed its Chapter 11 bankruptcy petition on October 31. Sommers reported that there are dozens of CFTC staffers working on finding the missing funds.

Meantime, former MF Global head Jon Corzine has said that he, too, doesn’t know where the money went. He issued an apology to employees, customers, and investors who have had to deal with the fallout from brokerage firm’s collapse. Since MF Global announced it was seeking bankruptcy protections, thousands of clients have seen their assets frozen.

MF Global Shortfall May Be More than $1.2B, Says Trustee

Published on: November 26, 2011 | by Shepherd Smith Edwards & Kantas, LLP

According to trustee James Giddens, MF Global Inc. may have a greater than $1.2B shortfall in US segregated customer accounts. Giddens has been tasked with overseeing the failed company’s liquidation.

Previously, the estimated shortfall had been $593 million. Now, however, that estimate has likely changed. Giddens says that it will take $1.3 billion to $1.6 billion dollars to distribute 60% of what should have been found in the accounts of customers. He has noted that how much of the assets he can access is not the same as the shortfall amount. Giddens is reportedly close to exhausting the money that he does control.

$5.45 billion in money from customer accounts were frozen on the last day of October, one day after an MF Global unit reported that client funds (Commodity Futures Trading Commission rules say these should have been segregated) had experienced a material shortfall. Parent company MF Global Holdings Inc. then sought bankruptcy protection.