Amid reports that missing customer money from MF Global’s bankruptcy has been found, the company’s industry regulator, CME Group, took steps this week to shore up confidence in the market while members of Congress continued their review on Capitol Hill.
The New York Times reported Jan. 31 that investigators have located most of the missing money from the failed company, though it may never be recovered and returned to customers.
The newspaper said federal investigators have found missing client funds that were likely used to repay customers, banks and other lenders that had started to ask for their money as the company began to collapse in the fall of 2011.
Sources cited did not elaborate on the location of the funds due to the ongoing investigation, which could result in criminal charges if wrongdoing is confirmed.
CME Group, MF Global’s main regulator at the exchange level, announced Feb. 2 it will set up a $100 million fund to “provide additional protection to family farmers and ranchers.”
The company said that in the wake of the MF Global bankruptcy, it has decided to add this “security measure” to protect agricultural producers who are using the market to hedge risk.
Since the bankruptcy in late October, market watchers have been concerned about market participants losing faith in the system, even if they did not lose funds held with MF Global.
The CME fund is set to be established by March 1 and should allow farmers and ranchers using CME products to be eligible for up to $25,000 per account in the event of “losses resulting from the future insolvency of a (CME) clearing member or other market participant.”
CME Group Executive Chairman Terry Duffy said in a statement that “many have been hurt by MF Global’s bankruptcy.
Though all the facts are not yet in, we do know our industry needs to focus on enhancing protections for customer segregated monies held at the firm level…to ensure they do not find themselves in a position similar to the first two weeks of the MF Global bankruptcy.”
On Capitol Hill, risk management officers from MF Global and several officials from ratings agencies testified at a hearing held Thursday morning by a House Financial Services Committee subcommittee.
Michael Roseman, former global chief risk officer at MF Global, said he had warned former chief executive Jon Corzine and the company’s board of directors about the firm’s rising stake in European debt in October 2010 and was fired several months later.
Roseman testified his “views on risk” were a factor in his firing, which several Members of Congress indicated agreement with.
For more from the hearing, visit http://financialservices.house.gov/Calendar/EventSingle.aspx?EventID=276489. For more on the CME fund, visit http://cmegroup.mediaroom.com/index.php?s=43&item=3237.