New rules aim to prevent MF Global repeat

Tim Wallace
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REGULATORS want to create a “radical shift” in the way clients’ money is protected by investment firms, yesterday announcing a new effort to prevent savers from losing out when companies go bust – in part in reaction to the collapse of brokerage MF Global last year.

The Financial Services Authority (FSA) launched the consultation on plans to ensure central counterparties or clearing houses improve their response to the failure of a clearing member, either allowing clients to keep trading or to see their money returned.

The planned changes will also see the introduction of multiple client money pools – effectively changing the regime to split an investment firm’s clients’ money over several pools, so if it goes bust it may only lose some customers’ money, rather than all of it.

MF Global collapsed last October after a $6.3bn (£3.96bn) bet on the Eurozone went wrong, undermining market confidence in the broker.

The legal ramifications of that collapse are still unravelling – clients hope for the return of $1.2bn in frozen assets, some of which are gradually becoming available.

This consultation is in part aimed at speeding up that process in future, in the hope that burned clients will not be left quite so badly out of pocket for so long.