The U.S. Commodity Futures Trading Commission, which is investigating what happened to about $600 million in client money missing from failed brokerage MF Global Holdings Ltd., takes laws requiring the segregation of customer accounts “very seriously,” the agency’s top enforcement official said.
The law requires customer accounts to be “segregated every moment of every day,” CFTC Enforcement Director David Meister said today at a Practising Law Institute event in New York. “We do not need to prove intent” and the CFTC can seek a penalty for “every instance” in which accounts were not properly segregated, he said.
MF Global filed the eighth-largest U.S. bankruptcy after making a wrong-way $6.3 billion trade on its own behalf on bonds from indebted European nations. The company moved hundreds of millions of dollars from its futures client accounts to its own securities brokerage in the days before its Oct. 31 bankruptcy, according to a person familiar with an audit of the company.
The transfers at MF Global were made “in a manner that may have been designed to avoid detection,” CME Group Inc. (CME), the world’s largest futures exchange, said in a Nov. 2 statement. CME audited MF Global during the week before the bankruptcy and found the accounts were properly segregated.
“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,” Jill E. Sommers, the CFTC commissioner overseeing the probe, said in a Nov. 10 statement.
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