The MF Global saga continues today, and it's both deeply unfortunate for those clients who are involved in the mess and a negative for the investing community at large, as it is simply another event that erodes confidence in the financial industry. Confidence continues to slip, and that's likely at least a small part (among a number of other issues) of the reason why retail investors continue to pull money from mutual funds.
What's particularly displeasing is that a page on the MF Global website covering "Client Asset Protection" still remains, including a segment on segregated funds (see here), which they failed to do.
Sadly, some client money still remains unaccounted for, and while some customers have had their positions moved to other brokerages, cash remains tied up. The situation is a failure of regulation and the firm's leverage was also massive, which is remarkable only a few years after the 2008 crisis. "The firm's bad bets on European debt triggered a crisis of confidence in one of the most active commodity brokers in the world.
The Commodity Futures Trading Commission investigation follows the discovery that some $600 million was missing from segregated accounts, customer funds that are meant to be held separate from the broker's own money. There are growing concerns that regulators may be unable to find the missing customer funds, at least in a state where it can be paid back to creditors."
"The CFTC also said it would do a sweeping audit of all clearing futures commission merchants to ensure customer funds were properly segregated."
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History of MF Global and Current Situation
Legendary investor Eric Sprott discusses counter-party risk, leverage and loss of confidence in the banking system with James Turk in a must-watch new interview below:
