Subscribe to our mailing list

* indicates required

 

 

 

 

BROWSE BY TOPIC

ABOUT FINANCIALISH

We seek to provide information, insights and direction that may enable the Financial Community to effectively and efficiently operate in a regulatory risk-free environment by curating content from all over the web.

 

Stay Informed with the latest fanancialish news.

 

SUBSCRIBE FOR
NEWSLETTERS & ALERTS

FOLLOW US

Archive

'MF Global Rule' Approved by CFTC

December 5, 2011
The CFTC has voted unanimously to adopt tougher constraints on Wall Street risk-taking.  The effort is being referred to as the “MF Global rule,” named after the collapsed brokerage firm that reportedly accessed without authorization hundreds of millions in customers' segregated funds. As drafted, the new rule will limit how the brokerage industry can invest customer money, largely banning firms from using client funds to buy foreign sovereign debt.  It also will prevent a complex transaction that allowed MF Global, in essence, to borrow money from its own customers.  Firms that seek to invest customer funds in foreign government bonds will be required to first petition the CFTC for a special exemption.   The new rule also would ban firms from using client money so that one arm of the company can lend to another, a complex transaction known as an in-house repurchase agreement.
The CFTC had originally planned to finalize the rule months ago, but the agency delayed the overhaul amid fierce push-back from Jon Corzine, who at the time was the chief executive of MF Global.  Mr. Corzine resigned on 11/4/11, four days after MF Global filed for bankruptcy. MF Global allegedly violated that principle in the firm’s final chaotic days, tapping its segregated client accounts to meet its own financial obligations.  Investigators have since been looking for what some estimate is as much as $1.2bn in missing money.  (The CFTC is leading the hunt for the money while the FBI is examining potential wrongdoing.) This is the first in a line of many new rules regulators are considering, including numerous proposed rules for brokerage firms. The SEC is weighing new accounting disclosures for the industry and there is renewed call for federal regulators to keep a closer watch of brokerage firms, reclaiming oversight authority now delegated to for-profit exchanges like the CME Group. For more info, go to [Dealbook 12/5/11].