Probes start into MF Global client funds

City A.M. Reporter
US regulators are launching a broad review into the business practices of failed futures brokerage MF Global as their hunt continues for over $600m (£375m) in missing customer money.

Round-the-clock shifts for examiners have become the norm as they sort through the collapse of the firm headed by Jon Corzine.

The head of the US futures regulator said the shortfall in customer funds at MF Global was “troubling”, while stressing that account segregation is vital to protecting customers in the futures and swaps markets.

Gary Gensler, chairman of the Commodity Futures Trading Commission, said the agency would take “all appropriate action” to maximise the recovery of customer funds and “discover the reason for the shortfall in segregated customer money”.

The Securities and Exchange Commission is also investigating trading in MF Global’s convertible bonds prior to its collapse to determine whether some investors sold the debt based on confidential information, Bloomberg reported.

And auditor PwC has received a subpoena from the CFTC regarding MF Global assets, a spokesperson said.

MF Global filed for bankruptcy on Monday after risky bets on European sovereign debt scared away clients and investors.

Meanwhile, its administrator KPMG apologised for the inconvenience MF Global’s bankruptcy was causing creditors, and said it was working as fast as possible to release clients’ assets.

“We are working with the companies’ staff to transfer client positions wherever possible,” said KPMG’s UK head of restructuring, Richard Fleming.

“We understand the frustration among clients and market participants at the disruption that is currently being experienced and are sorry for the inconvenience this is causing.”