MF Global Holdings Ltd. (MF), the futures broker, increased net capital at its U.S. unit after the Financial Industry Regulatory Authority raised concern about its exposure to European sovereign debt.
MF Global Inc. “increased its net capital and currently has net capital sufficient to exceed both the required minimum levels and Finra’s early warning-notification level,” the New York-based company said in a filing with the Securities and Exchange Commission dated Sept. 1. The firm said it doesn’t believe “the increase in net capital will have a material adverse impact on its business, liquidity or strategic plans.”
Global regulators are trying to avert future shocks by pushing financial-services firms to curb risk and build capital. The Wall Street Journal reported the capital increase earlier today.
Finra asked the company to “modify its capital treatment of certain repurchase transactions to maturity collateralized with European sovereign debt,” the filing said.
Once it was clear Finra wanted a different capital treatment, the broker reallocated the money from internal sources, said Diana DeSocio, a spokeswoman for MF Global. As of Aug. 31, the firm had $167 million in excess capital, she said.
MF Global, led by Chief Executive Officer Jon Corzine, 64, fell 25 cents, or 6.3 percent, to $3.71 in New York trading. The shares have dropped 56 percent this year.
Jefferies Group Inc. (JEF) also declined today, dropping as much as 7 percent. The New York-based investment bank had almost $3 billion of sovereign debt inventory at the end of the third quarter and may need to increase the amount of capital it holds, putting pressure on its shares, according to Douglas Sipkin and Warren Gardiner, analysts at Ticonderoga Securities LLC.
“While Jefferies is nowhere as reliant on Europe as MF Global, it is likely they, too, have to hold more capital against European-based repurchase agreements,” the analysts wrote today in research note.
Richard Khaleel, a Jefferies spokesman, didn’t respond to e-mail and phone messages seeking comment.
Jefferies slid 88 cents to $12.14 in New York today. The shares have fallen 54 percent this year through last week.