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Forum Post: SEC Provides Little-Known Way for Broker/Dealers to Keep Annual Filings NON-Public, Without Having to File a Confidentiality Request /// $1.2 Billion in Customer Funds is STILL Missing

Posted 6 years ago on Jan. 15, 2012, 6:27 p.m. EST by MonetizingDiscontent (1257)
This content is user submitted and not an official statement

$1.2 Billion in Customer Funds is STILL Missing


-January 15, 2012-

Amazing but true, the MF Global story is still red hot, reason being $1.2 billion in customer funds is still missing.

Last Monday in Forbes... http://www.forbes.com/sites/francinemckenna/2012/01/09/the-neverending-mf-global-story-regulators-block-the-truth-from-coming-out/ ...I gave readers a link to some very interesting facts uncovered by Bob English, an independent trader and blogger who has been following the MF Global story on his blog, Economic Policy Journal... http://english.economicpolicyjournal.com/2012/01/scrubbed-mf-global-filing-resurfaces-at.html

His findings raise serious questions about the (SEC) Securities and Exchange Commission’s regulation of MF Global and all broker/dealers. A summary of that post and some additional developments after press time is here. http://retheauditors.com/2012/01/10/mf-global-mystery-the-beginning-of-the-end-or-the-end-of-the-beginning/

It seems the SEC, maybe by design, maybe by careless default, is keeping the truth from the public about what went wrong at MF Global.

PwC’s... http://en.wikipedia.org/wiki/PricewaterhouseCoopers ...report to the SEC of internal control discrepancies at the broker-dealer for 2010 (and there IS one according to the filing index) – is private.

None of the auditor’s reports specific to MF Global’s broker/dealer are available to the public on Edgar for 2011.

“…it appears the SEC has provided a little-known, yet easy way for broker dealers to keep a substantial portion of their annual filings non-public, without having to file a confidentiality request. Several smaller brokers we contacted were not aware of this.

If the internal controls report of MF Global Inc. made it into its 2010 public filing, yet the financial notes did not, was it simply a case of improper separation of the public and private bound filings on the part of the filer? If so, why is the SEC not enforcing substantive error checking, inasmuch as we have found this phenomenon to be quite common for broker filings?

Or, is the SEC selectively determining itself which portions will be public and private, and committing errors (intentional or not) in the process? Recalling the deleted filings of JPM, Goldman, BoA and others, is it possible that what was supposed to be confidential was inadvertently made public, and upon petition from the filer (or its auditor), the entire public filing was simply deleted?”

My column at Forbes also noted that it’s not just the SEC who’s holding back information about MF Global from the public:

The CFTC, who seems to be using leaks... http://www.reuters.com/article/2012/01/06/us-mfglobal-idUSTRE8041SI20120106 ...to the press to deflect attention from its own role and responsibility for keeping an eye on customers’ money, is doing it, too. There is no data regarding status of segregated customer assets for MF Global on the monthly required regulatory report for FCMs posted by the CFTC for September, 2011.

I asked the CFTC:

“Did MF Global submit their data as an FCM for September on time within your required timeframe? If the CFTC received the data on time, why did the CFTC decide not to publish MF Global’s numbers as of September 30th? The full report was posted to the website on November 10, after the October 31 bankruptcy, but the data is “as of” September 30 when the firm was still in business.”

The CFTC spokesperson would not go on record with his response. Based on our conversation and the policies published on the CFTC ebsite of handling this report, I’ve determined that the September 30, 2011 financial statement filings for all FCMs, FCM/BDs, and RFEDs were originally due October 26th. The CFTC gives itself 12 business days after the due date to publish. It appears that organizations were given additional time due to the Veteran’s Day holiday. The Commission states that it “generally” publishes data for active FCMs only. MF Global Inc. declared bankruptcy October 31, 2011. At the time the September data was posted, MF Global Inc. was no longer an active FCM and, therefore, the firm and its data was deleted for the report.

The first private lawsuit naming PwC, the MF Global auditor, as well as several MF Global executives and JP Morgan, was filed last week by some Montana farmers... http://billingsgazette.com/news/state-and-regional/montana/farmers-and-ranchers-sue-over-mf-global-debacle/article_d95e3dd1-0d6c-5f4b-bb84-84ee4eaa68cd.html?oCampaign=hottopics ...Here’s a copy of the original complaint.

Are the holding company trustee Louis Freeh and the broker dealer SIPA trustee James Giddens ever going to investigate JP Morgan and auditor PwC? As I wrote here on January 10, the trustees have already given themselves an easy legal out:

Unfortunately for those who will be looking for third-parties like the auditor PwC and the banker JP Morgan to make up the difference in the missing funds, these disclosed conflicts set up an easy out for the Trustees to decline to investigate claims against the parties they have a deep and fruitful business relationship with. It happened before in a case that is too close for anyone involved here to claim ignorance of: Refco. http://retheauditors.com/2007/07/11/pwc-dodges-a-bullet-for-now-with-refco/

Let’s look at the conflicts that the trustees have just with PwC:

  • PwC is the external auditor for MF Global.

  • PwC is the external auditor for Man Financial, the firm from which MF Global was spun off.

  • PwC designed the internal controls for Refco, the firm Man Financial bought after Refco’s fraud drove it to bankruptcy and the firm that became MF Global after its IPO.

  • PwC was not pursued as a third-party aider and abettor of the Refco fraud because the judge decided that a prexisting conflict between PwC and the trustee’s firm precluded the trustee from personally pursuing PwC. The judge decided not to select another non-conflicted trustee to pursue PwC.

  • PwC is the auditor of JP Morgan, MF Global’s primary banker and largest creditor.

  • PwC is the auditor and a client of the SIPA trustee’s law firm Hughes Hubbard.

  • José R. Hernandez, the Chief Executive Officer of Freeh Group Europe, the consulting firm founded by MF Global Holding company trustee Louis Freeh, is a former European-based partner of PricewaterhouseCoopers (PwC).

  • PwC is auditor to Goldman Sachs, Corzine, Abelow, and Ferber’s former firm and a firm that bought a significant amount of assets from MF Global in its last days when MF was desperate for liquidity.

  • MF Global CFO Henri Steenkamp came to Man Financial, predecessor firm to MF Global, from PwC.

Don’t say I didn’t warn you when Judge Glenn allows Freeh and/or Giddens to say later, regarding pursuing claims against PwC, “Move along. Nothing to see here.” PwC is worth more to them alive then severely wounded.

In other news, I penned a somewhat provocative prediction for American Banker on January 3 regarding Jamie Dimon, CEO of JP Morgan.

Jamie Dimon will have the misfortune, I believe, of catching a significant amount of fallout from the MF Global mess. As MF Global’s primary banker, JPMorgan Chase has been consistently accused in the media and by the attorney representing a customer coalition... http://www.hedgeworld.com/blog/?p=3945 ...of taking advantage of the firm’s vulnerable financial state. Bloomberg News reported... http://www.bloomberg.com/news/2011-12-13/jpmorgan-actions-as-mf-lender-likely-to-be-probed-trustee-giddens-says.html ...that the MF Global trustee said “certain” actions of JP Morgan Chase “are likely to be the subject of investigation.”

What JP Morgan Chase may have allowed – the use of customer funds to meet MF Global’s corporate obligations – is something JP Morgan was recently severely sanctioned for in the U.K. The bank’s London unit was fined a record 33.3 million pounds... http://www.fsa.gov.uk/pages/Library/Communication/PR/2010/089.shtml ...by the FSA, Britain’s financial regulator, for commingling client funds in its futures operation.

Some commenters were not crazy about the tone of the column. Or the title. You be the judge:

Jamie Dimon Will Have His Comeuppance in 2012


-JAN 3, 2012-



Read the Rules
[-] 1 points by MonetizingDiscontent (1257) 6 years ago

“As MF Global was Falling Apart, the Customer Accounts & What Remained of the Customer Money Was Divided Up Among FCMs in Good-Standing with Clearinghouses (mainly CME) & Regulators.”


-January 16, 2012 -

(FCMs - Futures Commission Merchant / CME - Chicago Mercantile Exchange)

C a t c h i n g U p :

::::::::::::::::::::::::::::::::CFTC, FCM -Data- in a Post-MF Global World::::::::::::::::::::::::::::::::


-January 16, 2012-

(John P Needham) It has been a few months since I took a look at the CFTC FCM Data reports, which list FCM Customer Segregated Funds, Customer Secured Funds (also called 30.7 funds), and other data. As most readers will already know, MF Global flamed out spectacularly at the end of October, and with that collapse it was revealed that somewhere between $600 million and $1.2 billion of Customer Seg money is “missing” from the FCM. The hunt for that money, and the hunt for the perpetrators of this fraud and theft, continues to this day.

(If you don’t know about MF Global’s bankruptcy and scandal, this probably isn’t the blog, much less the blog post, for you.)

As MF Global was falling apart, the customer accounts and what remained of the customer money was divided up among FCMs in good-standing with clearinghouses (mainly CME) and regulators. I was told anecdotally that CME ordered the division of client business among multiple FCMs in a somewhat arbitrary way. For example, some of MF Global’s energy clients were assigned to FCMs that were not terribly active in the energy markets; additionally, MF Global “local” business (individual trader accounts) had to be divided up among the diminishing number of FCMs that continue to clear that business.

In the weeks and months that followed MF Global’s demise, some of the business that was (as I was told) somewhat arbitrarily assigned to FCMs had the opportunity to move to other FCMs in a more orderly manner than in those hectic weeks following the bankruptcy filing. Now that the dust is starting to settle a little bit, it seems like a good time to take a look at the CFTC FCM data in a post-MF Global world.

(((The source for the CFTC data is here))) http://www.cftc.gov/MarketReports/FinancialDataforFCMs/index.htm

:::::::::::::::::::::::::::::::::::::::::::::::::: The Starting Point :::::::::::::::::::::::::::::::::::::::::::::::::

The last known “good” date for FCM data that included MF Global was August, 2011. The September report, which presumably would have included the failed FCM, has MF Global conspicuously missing. So, let’s take a look at August’s report.

(((FCM Data August 2011 Sorted By Seg))) http://johnpneedham.files.wordpress.com/2012/01/fcmdataaugust2011-sorted-by-seg.pdf

In August, 2011 the top FCM measured by Customer Seg was Goldman Sachs, at $23.166 billion; second was Newedge at $22.348 billion. JP Morgan, Deutsche and Citi rounded out the top 5.

The next five FCMs were Merrill Lynch, UBS, MF Global, Barclays, and CSFB (USA).

MF Global, at 8th largest FCM in terms of Customer Seg, reported $7.270 billion. As such, MF Global reported 4.27% of all the Customer Seg funds in August, 2011. In contrast, the top 2 FCMs each had more than 13% of all Seg funds, and had nearly 27% among them. The top 5 FCMs comprised 53% of all the Customer Seg Funds reported to CFTC in August, 2011. The total Customer Seg funds reported for August, including MF Global, was $170,185,554,883.

::::::::::::::::::::::::::::::::::::::::::::::The Most Recent Month::::::::::::::::::::::::::::::::::::::::::::::

(((FCM Data Sorted By Seg Nov2011))) http://johnpneedham.files.wordpress.com/2012/01/fcmdatanov2011-sorted-by-seg1.pdf

The most recent month for which CFTC FCM data is available is November, 2011. As stated above, MF Global’s figures were mysteriously omitted from the September, 2011 report, and of course, by the October reporting date, the FCM has collapsed into bankruptcy. In November, Goldman Sachs again topped the list, with $22.299 billion in Customer Seg. JP Morgan was second with $17.597 billion and Newedge had slipped to third, with $17.447 billion. Deutsche and Citi rounded out the top five again.

With MF Global now gone, the next five FCMs are UBS, Merrill Lynch, Barclays, CSFB (USA) and Morgan Stanley.

Total FCM-reported Customer Seg Funds stood at $149,071,676,345, down more than $20 billion from the days before as much as $1.2 billion of customer money vanished from MF Global. I don’t know if that figure is somehow seasonal, but a drop of $20 billion in Customer Seg funds over three months is astonishing to me.

With the top five-or-so FCMs remaining relatively constant in terms of Customer Seg, and a drop of $20 billion overall, the percentages also provide some insight.

  • Goldman now holds almost 15% of Customer Seg Funds (14.95889%)

  • JP Morgan and Newedge are both at almost 12%

  • The top 5 FCMs hold more than 55% of all Customer Seg funds as of the November reporting period.

I’d be interested to hear what you all think of the numbers-crunching provided here. Do any of these stats/statements stand out to you, as surprising or as expected? Please let me know your thoughts.

(((View this artcile Here))) http://needhamconsulting.net/2012/01/16/catching-up-cftc-fcm-data-in-a-post-mf-global-world/

::::::::::::::::::::::::::::::::::::::::::: - SEC FOCUS Report Link - :::::::::::::::::::::::::::::::::::::::::::

::::::::::::::::::::The Neverending MF Global Story: Regulators Block The Truth::::::::::::::::::::



Instead of looking out for MF Global investors – and customers who are still waiting for their money – it looks like regulators and the bankruptcy trustees are busy suppressing information. Instead of full transparency, regulators and the trustees are holding onto crucial details that might tell us all who was asleep at the wheel when the broker/dealer and futures commission merchant (FCM) headed over the cliff.

Bob English, an independent trader and contributing editor to the blog, Economic Policy Journal... http://english.economicpolicyjournal.com/2012/01/scrubbed-mf-global-filing-resurfaces-at.html ...published a post this morning that raises serious questions about the Securities and Exchange Commission’s program of regulation for broker/dealers and, in particular, the agency’s role in keeping the truth from the public about what went wrong at MF Global. We’re also being kept from the truth about other broker/dealers who may be putting risky trades on their books or whose controls over segregation of customer assets may be weak or non-existent.

(((Continue Reading this article Here))) http://www.forbes.com/sites/francinemckenna/2012/01/09/the-neverending-mf-global-story-regulators-block-the-truth-from-coming-out/

::::::::::::::::::::::::::::Scrubbed MF Global Filing Resurfaces at the SEC::::::::::::::::::::::::::::

:::::::::::::::::::But More Questions About Suspicious Filing Practices Surface:::::::::::::::::::


Thursday, January 5, 2012