The Commodity Futures Trading Commission (CFTC) has opened an investigation into the bankruptcy of securities firm MF Global Inc. and a $600 million shortfall in customer securities.
CFTC Commissioner Jill Sommers, a Republican, has been picked to act as senior commissioner in the matter. CFTC Chairman Gary Gensler has recused himself because of a former working relationship with the head of MF Global, former New Jersey Gov. Jon Corzine, while at Goldman Sachs.
The CFTC’s Division of Enforcement will explore whether the Commodity Exchange Act (CEA) or Commission regulations were violated by MF Global, and it has been authorized to issue subpoenas, the agency said. New York-based MF Global filed for bankruptcy on Oct. 31 following an ill-timed bet on European debt markets (see Daily GPI, Nov. 2). About $600 million in customer securities overseen by MF Global are missing.
“While the commission normally does not comment on investigations, the commission has determined it is in the public interest to confirm the existence of this particular investigation,” according to CFTC, which said it would not make any further comments on the investigation’s developments.
“Segregation of customer funds is at the core of customer protection in the commodity futures and options markets and must be maintained at all times. I have complete confidence in…Enforcement to carry out the necessary investigation to get to the bottom of what happened at [MF Global],” Sommers said.
“Aside from the investigation we will do everything in our power to ensure public confidence in the markets by directing a review of clearing futures commission merchants (FCM) to determine that segregated funds are being properly maintained in accordance with the CEA and Commission regulations.”
The CFTC has been monitoring the transfer of customer positions held by MF Global, almost all of which have been transferred to other registered FCMs, according to the agency.
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