MF Global mixed clients' funds with its own
Posted: Nov 1, 2011 12:02 PM ET
Last Updated: Nov 1, 2011 5:58 PM ET
MF Global, the troubled New York-based securities firm, broke rules requiring it to keep clients' money and its own funds in separate accounts, the head of the Chicago Mercantile exchange says.
CME Group Inc. CEO Craig Donohue said Tuesday MF Global was "not in compliance" with requirements set by his company and the Commodity Futures Trading Commission, its key regulator.
"While we are unable to determine the precise scope of the firm's violation at this time, we are investigating the circumstances of the firm's failure," Donohue said.
Also on Tuesday, the Wall Street Journal reported that the FBI plans to look into questions about whether money is missing from client accounts, and if so, whether that constitutes a crime.
The newspaper did not identify its source.
MF Global filed for bankruptcy protection on Monday.
Regulators said they have discovered money is missing from some of the firm's customer accounts.
Jon Corzine, a former New Jersey governor, chief of Goldman Sachs and major fundraiser for U.S. President Barack Obama, leads MF Global.
Corzine has helped raised at least $500,000 for Obama's re-election campaign since April.
Corzine prompted MF Global to make more trades for the company's own profits, a practice known as proprietary trading.
Some of that trading was conducted on the CME.
He pushed for the $6.3 billion US bet on debt issued by Italy, Spain and other European nations with troubled economies that ultimately doomed the company.
Companies regulated by the CFTC must account for clients' money and investments separately from money and investments belonging to the company.
The CFTC said in September that MF Global was overvaluing some of its European debt investments. It required the company to raise more cash, according to court papers filed on Monday.
MF Global reported its biggest-ever quarterly loss last week, mainly because of losses on proprietary trading.
Credit rating agencies downgraded the company's bonds to junk status, and business partners demanded that it put up more cash to guarantee its trades. The result was a severe cash crunch that forced MF Global into bankruptcy court.
Debt from many European nations has lost value in recent months because bond investors fear one or more countries might default.
On Monday, the New York Federal Reserve said it suspended MF Global from doing new business as a primary dealer.
Primary dealers are companies considered financially secure enough to sell US government debt on behalf of the Federal Reserve.
Top News Headlines
- Search for Oklahoma tornado survivors nearly complete
- Rescue workers raced to complete the search for survivors and the dead in the Oklahoma City suburb where a mammoth tornado destroyed countless homes, cleared lots down to bare red earth and claimed 24 lives, including those of nine children. more »
- Video forensics: How easy would it be to fake a Rob Ford video?
- Two media outlets reported last week that they had seen a cellphone video of Mayor Rob Ford allegedly smoking crack, a claim that has gone global. If a video does surface, how easy would it be to determine its authenticity? CBC News asked video forensic analyst David McKay. more »
- Eritreans in Canada say consul still demands cash from them
- Evidence obtained by CBC News suggests Eritrea's top diplomat in Canada is again soliciting taxes from the Eritrean community despite a threat by Canada eight months ago not to renew his credentials if he kept at it. more »
- Senate sends Duffy expense audit for 2nd internal review
- The Senate decided to send Senator Mike Duffy's audit report back to its internal committee for a second review, despite objections from the Liberal Senate leader, who argued the RCMP should be tasked with the job. more »
- How the weather info that storm chasers use can keep you safe
- Radar imagery and a stream of weather information are readily available to the public when severe weather bears down. more »
Latest Business Headlines
- Carney's parting advice: play to Canada's strengths
- Outgoing Bank of Canada governor said Canada's economy is poised for growth as long as all stakeholders keep pulling in the same direction. more »
- B.C. mine's temporary foreign workers case dismissed
- The Federal Court of Canada has dismissed a challenge launched by two unions against a company that hired more than 200 temporary workers from China for its coal mine in northeastern B.C. more »
- Most wish they could ditch wallet, PayPal poll suggests
- A survey from the e-commerce firm PayPal suggests the majority of people in Canada, the U.S., the U.K., Germany and Australia wish they could leave their wallet at home and pay for purchases in a less cumbersome way. more »
- Home Depot profit up 18% as renovation rebounds
- Home Depot Inc.'s first-quarter net income rose 18 per cent, thanks to the ongoing housing recovery, despite a chilly and wet spring. more »
Lang & O'Leary Exchange
The data on this site is informational only and may be delayed; it is not intended as trading or investment advice and you should not rely on it as such.
- Microsoft unveils Xbox One
- Deadly Oklahoma tornado confirmed as most powerful type
- Only 1 set of human remains found at Millard farm, police say
- Rob Ford faces more calls to address crack allegations
- Cloverdale Rodeo 'racist attack' investigated
- Kids from levelled Oklahoma schools recount deadly tornado
- Yukon couple hold record for longest marriage in country
- Aboriginal woman settles lawsuit over 3½ years solitary confinement
- Search for Oklahoma tornado survivors nearly complete