MF Global Told SEC, CFTC of Potential ‘Deficiencies’ in Customer Accounts

MF Global Holdings Ltd. (MF) told U.S. regulators this morning there were potential “deficiencies” in some customer accounts, according to a joint statement from the Securities and Exchange Commission and the Commodity Futures Trading Commission.

Federal regulators have found that hundreds of millions of dollars have recently gone missing from MF Global, prompting an investigation, the New York Times reported today on its website, citing several unidentified people briefed on the matter. The discovery of the missing funds, now numbering less than $700 million, scuttled MF Global's effort to sell a part of the firm to another brokerage, the Times reported. The regulators are probing whether MF Global diverted some customer money to support the firm's trades, the paper said.

“For several days, the SEC, CFTC and other regulators had been closely monitoring developments affecting MF Global Inc., a jointly registered futures commission merchant and broker- dealer, in anticipation of a transaction that would include the transfer of customer accounts to another firm,” the regulators said in the e-mailed statement. “Early this morning, MF Global informed the regulators that the transaction had not been agreed to and reported possible deficiencies in customer futures segregated accounts held at the firm.”

The regulators said they determined that a bankruptcy proceeding “would be the safest and most prudent course of action to protect customer accounts.”

Diana DeSocio, an MF Global spokeswoman in New York, didn't immediately reply to a phone call and an e-mail from Bloomberg News requesting comment.

MF Global Holdings, the holding company for the broker- dealer run by ex-Goldman Sachs Group Inc. co-chairman Jon Corzine, filed for bankruptcy protection today as it seeks to reorganize after making bets on European sovereign debt. Its broker-dealer unit, MF Global Inc., faces liquidation.

To contact the reporter on this story: Silla Brush in Washington at sbrush@bloomberg.net

To contact the editor responsible for this story: Otis Bilodeau at obilodeau@bloomberg.net

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Oct. 31 (Bloomberg) -- Neil Barofsky, former special inspector general for the U.S. Treasury's Troubled Asset Relief Program and a Bloomberg Television contributing editor, Sean Egan, president of Egan-Jones Ratings Co., and Richard Bove, an analyst at Rochdale Securities LLC, offer their views on today's filing for bankruptcy protection by MF Global Holdings Ltd. This report also contains comments from Dean Maki, chief U.S. economist at Barclays Capital; Matthew McCormick, vice president and portfolio manager at Bahl & Gaynor Inc.; Alexander Diaz-Matos, an analyst at Covenant Review LLC; David Kotok, chief investment officer at Cumberland Advisors Inc., and William Cohan, author of "Money and Power: How Goldman Sachs Came to Rule the World" and a Bloomberg View Columnist. (Source: Bloomberg)