In the shadows of the MF Global bankruptcy and the disappearance of $1.6 billion in customer funds, the CFTC has filed a complaint against another broker, accusing it as well of having violated a cornerstone protection of the futures market - and that of all financial markets - the proper segregation of customer funds. In this case, the broker is run by high-profile U.S. commodities trader Mark Fisher.  And, in no uncertain terms.  Mr. Fisher defends the actions of his firm - though he perhaps acknowledges having committed a violation on technical terms. Needless to say, the sensitivities of all parties involved are quite high - particularly because both the CFTC and CME were heavily criticized for failing to prevent the customer fund losses at MF Global.  Under these circumstances, it will probably take some doing to reach an equitable (and face-saving) settlement between the combatants regulators and the regulated.  And with sensitivities on high, questions of motive will naturally arise between the parties.  Continue reading. CFTC Civil Complaint. In its complaint filed in New York federal court, the CFTC notes that Mr. Fisher’s company, MBF Clearing Corp., routinely held between $30m and $90m of customer funds in a money-market account at JPMorgan Chase.  However, that account was not identified as belonging to customers - a situation that continued for at least 18 months, from September 2008 to March 2010.   Futures traders typically keep cash on hand with their brokers in anticipation of calls for additional collateral, if their positions lose money. In its defense, MBF said it had placed customer funds into the JPMorgan account 2 days after Lehman Brothers filed for bankruptcy in 2008 - and protecting customer funds “by depositing them in the safest bank in the world and in the most secure investments, namely U.S. government securities.” When notified by the CFTC that the account might not qualify as segregated, the broker MBF said it moved all the customer funds out of the Chase account.  It also reported what had occurred to its designated self-regulatory agency, CME Group.  MBF proudly notes that, “Not a nickel of customer money was lost." CFTC's Position. Yet, the CFTC differs in its interpretation of the facts.  David Meister, CFTC Director of Enforcement, had this to say: "The CFTC’s segregated account requirements form a pillar of our regulatory scheme.  As should be clear from today’s action, we expect strict compliance with these laws and will go after those that fall short of the mark." Defense Counters. To which, Gregory Mocek of Cadwalader, Wickersham & Taft, who represents MBF, said: "It’s obvious this meritless case has been strategically announced to distract the public’s attention away from the CFTC’s handling of the MF Global case." [C-I Note: There's nothing like conciliatory words between opposing parties in a law suit - to smooth any rough edges.] CFTC said MBF acknowledged to CME Group auditors in 2009 that it lacked a letter showing customer funds were segregated  [an admission of 'guilt'.].  Making matters worse, MBF did not obtain such a letter until June 2010, according to the regulators. Mr. Fisher is "an influential member of the futures industry at large, a globally-respected professional trader, a guest speaker at industry conferences and the best-selling author of The Logical Trader: Applying A Method to The Madness," according to the MBF website. Character References on Mr. Fisher's Behalf. As CME Group negotiated with seat holders to buy the New York Mercantile Exchange in late 2008, Mr Fisher helped broker a deal.  "Mark has worked hard to protect member interests and has achieved a vastly improved transaction," 2 Nymex seat holders wrote in a letter to fellow seat holders. MBF, founded in 1987, this year ceased to be a clearing futures broker, and now clears trades through another broker, according to the website. C-I hopes the two sides reach a speedy and equitable settlement. [FT, 3/13/12]