MF Global Inc. can’t get court approval for a settlement with the U.S. Commodity Futures Trading Commission until the defunct broker determines whether an admission of wrongdoing will cause insurers to deny coverage to its directors and officers, a judge said.
U.S. Bankruptcy Judge Martin Glenn in Manhattan today ordered a trustee for MF Global to try to resolve the issue with insurers. If that effort fails, the trustee may have to pursue litigation, Glenn said.
“I’m withholding approval for you to enter the consent order with the CFTC,” Glenn said.
The settlement over MF Global’s collapse calls for the company to repay customers in full and pay a $100 million civil penalty if it has money left over. MF Global’s trustee also must admit to “the allegations pertaining to liability against MFGI based on the acts and omissions of its employees,” according to court papers.
MF Global Holdings Ltd., the brokerage’s parent company, filed for bankruptcy on Oct. 31, 2011, after a $6.3 billion bet on bonds of some of Europe’s most indebted nations. The company listed assets of $41 billion and debts of $39.7 billion.
Glenn said the CFTC seems to be joining the Securities and Exchange Commission in steering away from settlement language in which parties neither admit or deny wrongdoing.
Separately, James Kobak, a lawyer for MF Global trustee James Giddens, said the company will receive more than $300 million from a resolution with its U.K. unit. The expected amount was $290 million, according to spokesman Kent Jarrell.
A pending lawsuit against the company’s former management, including ex-New Jersey Governor and onetime Goldman Sachs Group Inc. Co-ChairmanJon Corzine, will affect the size and timing of further distributions, Giddens has said.
The holding company’s Chapter 11 case is In re MF Global Holdings Ltd., 11-bk-15059, U.S. Bankruptcy Court, Southern District of New York (Manhattan). The liquidation of the broker is In re MF Global Inc., 11-bk-02790, in the same court.
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