MF Global’s U.K. Administrator KPMG Says It Knows Where Clients’ Money Is
MF Global Holdings Ltd.’s U.K. administrator says it found all of the British unit’s segregated client funds and collected 82 percent of the money.
Richard Heis, a KPMG LLP partner working on the administration, said the firm is trying to recover remaining customer assets, some of which were held by the failed broker’s parent company in the U.S.
Trustees for the U.S. bankruptcy of MF Global Holdings have estimated as much as $1.2 billion is missing from segregated customer funds, which are supposed to be protected. Jon S. Corzine, the former chairman and chief executive, apologized to clients and investors for the misuse of funds at a hearing before U.S lawmakers yesterday.
The allegation in the U.S. “is that nobody knows where the money is,” Heis said in a phone interview today. “We know exactly where the money is.”
The parent company, based in New York, was the fifth- largest financial company to file for bankruptcy when it sought protection on Oct. 31.
KPMG was appointed to supervise the special administration of the broker’s London unit, in the first use of a U.K. program designed to quickly unwind failed financial firms.
“To hear that something like 80 percent is likely to be returned is very helpful as we hadn’t had much news before that,” said Douglas Makepeace of New York-based Sperry Fund Management, which had money in a segregated U.K. client account. “Up to now, KPMG seemed to have been overwhelmed by the necessity to unwind huge numbers of positions one-at-a-time.”
In a separate update on its website, KPMG said it won’t sell MF Global’s Futures and Options, Brokerage, or CFD and Spreads divisions in London because of a lack of bids and that “high revenue generating employees were already holding discussions with alternative employers.”
The London-based Metals Division, including more than 50 staff, was sold to INTL FCStone (Europe) Ltd. in November for a “seven figure dollar sum,” KPMG said.
KPMG is working with U.S. Trustee James W. Giddens on the release of U.S. client money held in the U.K., but they haven’t agreed on how much U.S. money is in the country, Heis said.
“We’ve got client money with them. They’ve got client money with us,” he said. “We are working together in a constructive way to resolve those issues.”
All open client positions for MF Global U.K. have been liquidated or transferred to other brokers, Heis said, except for “a handful of deep out-of-the-money options that have little or no value.”
KPMG hasn’t returned any money to U.K. clients and plans to make an interim distribution early next year following consultation with a judge.
Around $1 billion of U.K. customer funds were frozen when MF Global collapsed. The segregated funds were automaticaly pooled at the start of the administration, Heis said.
So far, the U.K. administrators have received about 800 claims from MF Global’s clients and creditors. Heis said of the 7,000 claim forms downloaded from the KPMG website, about 85 percent were requests to repay customer funds.
KPMG said in a U.S. court filing it had $250 million remaining in accounts at the MF Global Inc. brokerage, of which $230 million is in segregated commodity accounts for customers.
The U.K. administrators haven’t received any money from the trustee of the U.S. brokerage and aren’t in line to get any of a third planned payout of $2.1 billion, KPMG said in a Dec. 6 court filing. KPMG said in an e-mailed statement not all of the $230 million was segregated under the definition used in U.K. regulations.
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