Subsequent to NIBA’s letter to the membership regarding PFG’s bankruptcy, we’ve had additional in-depth conversations with senior officials at the regulatory agencies and at the PFG trustee’s office. Here is what we’ve learned. 1. There are statutory limitations which restrict the scope of the NFA’s spending, and would seem to prevent the NFA from providing the assurance or adequate security to the PFG trustee which would be similar to what the CME Group provided to the MFGI trustee. Specifically, Section 17 of the Commodity Exchange Act (CEA) sets the standards for registered futures associations. This section was added to the…...

The Trustee is working to be able to distribute funds to customers, with the authorization of the Bankruptcy Court, as soon as possible. However, the Trustee must ensure that any such distribution goes to the correct customers in the correct amounts. Such a distribution would, of necessity, rely on the books and records of Peregrine. This requires that the Trustee be satisfied that he can rely on the accuracy and integrity of those books and records to the extent they identify customers and set forth the balance due to such customers. This is especially important in a case that started…...

The trustee liquidating MF Global Inc. (MFGLQ) won court approval to receive $130 million from CME Group Inc. to pay back the bankrupt brokerage’s customers and other creditors. U.S. Bankruptcy Judge Martin Glenn said in court papers filed in Manhattan bankruptcy court today that the agreement can go forward, overruling an objection from one customer. Glenn had heard arguments in court on Aug. 8., including those from the Commodities Future Trading Commission and Securities Investor Protection Corp. in support of the pact. » Read Full Article at Bloomberg   The Opinions expressed are the opinions of the author. The opinions,…...

A shortfall in customer funds revealed at Peregrine Financial Group last month renewed calls for an insurance program for futures customers, but the plan still faces many hurdles, including getting legislation approved by Congress. “I’ve put this proposal out there because we need to move this discussion forward and get a new law on the books to better protect customers,” Mr. Chilton said in an email. The fund, as Mr. Chilton outlines it, would be modeled on a similar insurance plan for securities customers and would be created by collecting fees from futures brokers “which would under no circumstance exceed…...

A federal judge has granted the bankruptcy trustee for Peregrine Financial Group the right to subpoena information from financial firms, including Goldman Sachs and JPMorgan Chase, with which Peregrine and its subsidiaries dealt. Peregrine’s founder, Russell Wasendorf Sr., is accused of misappropriating more than $200 million in client money. » Read Full Article on Bloomberg   The Opinions expressed are the opinions of the author. The opinions, the trading styles, trading information and trading programs are not endorsed by the NIBA, but are the individual opinions, styles, information and programs of the author....

The recent failures of MF Global and PFG represent two devastating FCM bankruptcies with substantial shortfalls in customer segregated assets. Each company also has significant firm assets – the MF Global trustee has apparently recovered more than $1.2B of firm assets and while it is too early to know what the PFG trustee will be able to marshal, PFG reported $31M of regulatory capital in its most recent Form 1-FR-FCM filing and there are news reports of an $18M office building, a $7M+ private jet and an array of other businesses and smaller properties. CFTC regulations provide that if there…...

As we go through the failure of PFGBest less than a year after MF Global, I wanted to alert brokers and GIBs in particular, to make sure you have ownership and access to your domain name. Being able to transfer your domain name in an emergency can help keep your email and website hosting up and running in the event of a crisis such as MF Global and PFGBest. Why does an FCM have control of my domain name? In the past, many FCMs tried to provide website and email hosting and support as a benefit to doing business with…...

Source: cattlenetwork.com The complex pursuit of the missing $1.6 billion in segregated customer funds lost by bankrupt broker MF Global could take up to six years to sort out, with full payback to customers unlikely, a top futures industry official said.   The Opinions expressed are the opinions of the author. The opinions, the trading styles, trading information and trading programs are not endorsed by the NIBA, but are the individual opinions, styles, information and programs of the author....

On June 4, 2012, the MF Global Inc. (“MFGI”) trustee released his first six month report on the SIPA liquidation of MFGI. In the report, the trustee detailed recoveries the trustee has already achieved and also prospective recoveries on behalf of both MFGI’s proprietary accounts and the segregated asset pools for MFGI’s former customers. A CFTC rule provides that in the event of shortfall an FCM’s firm assets go to make up the shortfall, this would mean that MFGI’s proprietary assets would be allocated to make up any extant shortfalls in the segregated asset pools of MFGI’s former customers. Creditors…...

In response to the NIBA letter sent to the CFTC last week, the CFTC has replied with a no-action letter, issued by the Division of Swap Dealer and Intermediary Oversight pursuant to Commission Regulation 140.99. » View CFTC Response as PDF...