Bank Client-Fund Data May Be Opened to Regulators
U.S. futures brokerages and their banks would make client-fund data accessible to regulators in the wake of the collapse of Peregrine Financial Group Inc., under a proposal approved by the National Futures Association.
Regulators would have view-only Internet access to information held at a bank or trust, Chicago-based NFA said today after endorsing the plan. The new requirements are subject to approval by the Commodity Futures Trading Commission, the main U.S. regulator of futures and swaps. Regulators currently don’t have direct access to client accounts.
Industry self-regulators would be able to check segregated customer-fund accounts “without asking the firm or the bank, and compare those balances to the firm’s daily segregation report,” NFA President Dan Roth said in a statement.
The NFA, a self-regulatory group, is seeking to bolster industry oversight after Peregrine, a commodity firm, collapsed in July with at least $200 million in client funds missing. MF Global Holdings Ltd. (MFGLQ) filed the eighth-largest U.S. bankruptcy on Oct. 31 and is being liquidated to pay customers facing a $1.6 billion shortfall.
Peregrine Founder and Chief Executive Officer Russell R. Wasendorf Sr. was indicted Aug. 13 by a federal grand jury on 31 counts of making false statements to regulators. He’s been in custody since July 13 following a suicide attempt and a signed confession that he had defrauded customers for 20 years.
Wasendorf forged the company’s statements from Firstar Bank, US Bank (BAC) and Harris Bank, he said in the signed statement. He also made forgeries of official letters and correspondence from the banks, along with trade confirmation statements.
“The simple fact is that Wasendorf’s forgeries fooled us, and fooled us for longer than any of us would like,” Roth said in testimony at a U.S. House Agriculture Committee hearing on July 25.
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