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April 20, 2012

Commodities/Futures Round Up: CFTC Cracks Down on Perpetrators of Securities Violations and Considers New Swap Market Definitions and Rules

Rep. John Larson (D-Conn.) and Rep. Chris Murphy (D-Conn.) are calling on the Commodities Futures Trading Commission to crack down on excessive energy market speculation. They believe that this type of speculation on oil that is “based on world events” is “abusive” and has been creating difficulties for Americans.

In their released statement, Murphy said that such speculation ups the price of a gallon of gas by 56 cents. The two lawmakers want the futures and option markets regulator to swiftly implement rules that have already been passed to curb excessive speculation.

In other commodities/futures trading news, last month the U.S. District Court for the Eastern District of Texas ordered two men and their company Total Call Group Inc. to pay over $4.8 million for allegedly producing false customer statements and making bogus solicitations related to an off-exchange foreign currency fraud. In CFTC v. Total Call Group Inc., Thomas Patrick Thurmond and Craig Poe will pay $1.62 million and $3.24 million, respectively. Per the agency, between 2006 through late 2008, the two men solicited about $808,000 from at least four clients for trading in foreign currency options.

Earlier this month, another company, registered futures commission merchant Rosenthal Collins Group LLC, consented to pay over $2.5 million over CFTC allegations that it did not adequately supervise the way the firm handled an account linked to a multibillion dollar Ponzi scam. The account, held in Money Market Alternative LP’s name, experienced “significant change” between April 2006 and April 2009 in how much money it took in. For instance, the CFTC says that even though the account at inception reported a $300,000 net worth and a $45,000 yearly income, deposits varied from $2 million to $14 million a year. RCG is also accused of failing to look into and report excessive wire activity involving the account. As part of the CFTC securities settlement, the financial firm consented to pay a $1.6 million fine and disgorge $921,260, which is how much RCT made in account fees.

Just three days before, the CFTC announced that its swaps customer clearing documentation rule packaging will expand open access to execution and clearing, enhance transparency, lower cost and risks, and generate competition. The rules will not allow arrangements involving swap dealers, designated clearing organizations, major swap participants, and futures commission merchants that would limit how many counterparties a customer can get into a trade with, impair a client’s ability to access a trade execution on terms reasonable to the best terms that already exist, limit the position size a customer can take with an individual counterparty, and not allow compliance for specified time frames for acceptance of trades into clearing. Also, the CFTC is thinking about adopting definitions for swap dealers, major security-based swap participant eligible contract participant, security-based swap dealer, and major swap participant. These entities were created under the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act.

Meantime, MF Global Inc. (MFGLQ.PK) liquidation trustee James Giddens reportedly believes that he can make claims against certain company employees. Possible claims again such persons could include allegations of customer funds segregation requirement violations and breach of fiduciary duty. Although MF Global had told regulators that it was unable to account for customer funds of up to $900 million when it filed for bankruptcy protection, investigators are now saying that this figure is closer to somewhere between $1.2 billion and $1.6 billion.

Commodities Futures Trading Commission

Trustee May Sue MF Officials, NY Times, April 12, 2011

CFTC Orders Rosenthal Collins Group, LLC, a Registered Futures Commission Merchant, to Pay More than $2.5 Million for Supervision and Record-Production Violations, CFTC, April 12, 2012

CFTC v. Total Call Group Inc.

More Blog Posts:
CFTC Says RBC Took Part in Massive Trading Scam to Avail of Tax Benefits, Stockbroker Fraud Blog, April 12, 2012

Texas Man Sued by CFTC Over Alleged Foreign Currency Fraud, Stockbroker Fraud Blog, February 23, 2012

CFTC and SEC May Need to Work Out Key Differences Related to Over-the-Counter Derivatives Rulemaking, Institutional Investor Securities Blog, January 31, 2012

Continue reading "Commodities/Futures Round Up: CFTC Cracks Down on Perpetrators of Securities Violations and Considers New Swap Market Definitions and Rules " »

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Posted In: CFTC , Financial Firms , MF Global , Ponzi Scams

March 15, 2012

SEC Chairman Mary Schapiro Stands By Agency’s 2011 Enforcement Record

Batting away criticism that many of the Security and Exchange Commission’s enforcement actions for fiscal year 2011 were actually follow-on administrative proceedings and not new actions, Chairman Mary Schapiro stood by the agency’s record. She also noted that in some instances, follow-ons are key to enforcing federal securities laws. Schapiro made her statements to a House Appropriations panel.

Per recent media findings, over 30% of the SEC’s FY 2011 735 enforcement actions (the agency has never filed this many in a fiscal year before) were follow-on administrative proceedings. Schapiro, who was testifying in front of the House Appropriations Financial Services Subcommittee on the White House’s proposed $1.566 billion FY2013 budget for the SEC, noted that some of the enforcement actions were the most complex to ever occur and included those involving municipal securities market-related bid rigging, misleading sales practices related to structured products, Foreign Corrupt Practices Act-related violations, and insider trading. She also pointed to the number of senior level people that have been the target of many of last year’s SEC enforcements.

Schapiro said that even as the SEC has already proposed or adopted regulations for over three-fourths of the duties it was tasked with under the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, the most challenging ones, including proposals to enhance disclosures for companies that use conflict minerals or pay governments for access to natural gas, minerals, and oil, are still on the horizon. So is the SEC’s joint proposal with banking regulators on the Volcker rule, which exempts insurance firms from proprietary trading restrictions while preventing financial institutions and affiliated insurers from being able to invest in private equity and hedge funds. She said stated the SEC is “rethinking” how it deals with its Volcker rulemaking.

The SEC Chairman also said that she hoped the Commission could finalize the Dodd-Frank Title VII-related derivatives rules by year’s end. Another rule, over the proposal to enhance disclosure for extraction users, should be completed by midyear, A rule over registering municipal advisors was expected to be adopted also by the year’ end. As for the White House’s proposed budget, Schapiro said that the SEC’s information technology needs, as well as its examinations program ,would be affected if the agency isn’t given the $1.566 billion.

Regarding MF Global Inc., Schapiro said that the failed brokerage firm had only 318 active securities accounts and 40,000 futures accounts. SEC staff is working with Securities Investor Protection Corporation trustee James Giddens to find investors’ missing funds and they plan to work with him to recover the monies.

Our stockbroker fraud law firm represents individual and institutional investors throughout the US. Shepherd Smith Edwards and Kantas, LTD LLP helps our clients recoup losses sustained as a result of broker and investment advisor misconduct and other forms of securities fraud.

Chairman Defends SEC Enforcements In FY 2011, Says Numbers ‘Not Misleading,' Bloomberg/BNA, March 7, 2012

Read SEC Chairman Schapiro's Testimony, SEC, March 6, 2012

More Blog Posts:
SEC Chairwoman Defends ‘No Wrongdoing’ Settlements, Institutional Investor Securities Blog, February 27, 2012
SEC is Finalizing Its Whistleblower Rules, Says Chairman Schapiro, Stockbroker Fraud Blog, April 28, 2011

Reductions to SEC’s Budget Will Cause Staff Furloughs, Says Schapiro, Stockbroker Fraud Blog, March 24, 2011

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Posted In: Financial Firms , MF Global , SEC Enforcement

December 10, 2011

$1.2 Billion of MF Global Inc.’s Clients Money Still Missing

According to the Commodity Futures Trading Commission, the whereabouts of $1.2M in MF Global Inc. customer funds are still unknown. Lawmakers at a Senate Banking Committee meeting grilled the CFTC officials earlier this week.

Speaking before the panel on Tuesday, CFTC Commissioner Jill Sommers said that the agency still has yet to find all the money. The CFTC began its investigation into MF Global’s collapse after holding company MF Global Holding filed its Chapter 11 bankruptcy petition on October 31. Sommers reported that there are dozens of CFTC staffers working on finding the missing funds.

Meantime, former MF Global head Jon Corzine has said that he, too, doesn’t know where the money went. He issued an apology to employees, customers, and investors who have had to deal with the fallout from brokerage firm’s collapse. Since MF Global announced it was seeking bankruptcy protections, thousands of clients have seen their assets frozen.

One suspicion is that MF Global used clients’ money to make significant investments in European sovereign debt. In remarks that were prepared for a U.S. House of Representatives Agriculture Committee last week, CME Group Inc. Executive Chairman Terrence Duffy accused MF Global of misusing hundreds of millions of dollars in client funds and moving the cash to broker-dealer’s own accounts. Duffy noted that this is a violation of the Commodity Exchange Act. CME was an MF Global regulator. The futures exchange operator claims that during a phone call the brokerage firm admitted to making these transfers.

CFTC Chairman Gary Gensler has recused himself from the probe into MF Global. He sees his business ties to Corzine as a conflict. Corzine was the chairman of The Goldman Sachs Group Inc. when Gensler worked there.

However, CFTC ethics officials, who are aware of their connection, don't see this as a problem. At the Senate Banking Committee hearing on Tuesday, Republicans accused Gensler of shirking his duties.

When MF Global sought Chapter 11 bankruptcy protection, the firm left behind over $2 billion in debt. JP Morgan Chase, with over $1.2 billion in corporate bonds, and Deutsche Bank, with $1 billion in bonds, are two of its larger unsecured creditors.

Our stockbroker fraud lawyers at Shepherd Smith Edwards & Kantas, LLP are investigating MF Global Holdings LTD. If you were an MF Global customer who believes you may have a securities claim, we want to hear from you. This is not the type of case you want to pursue without an experienced securities fraud law firm representing you.

Unfortunately, investors do lose money because of broker misconduct. There is no reason why you should have to suffer because of other people’s negligence and mistakes.

Regulators: $1.2B of MF clients' money still missing, Investment News, December 6, 2011

Corzine sorry, puzzled by missing MF Global money, Reuters, December 8, 2011

MF Global files for bankruptcy protection, CNN Money, October 31, 2011

More Blog Posts:
MF Global Shortfall May Be More than $1.2B, Says Trustee, Stockbroker Fraud Blog, November 26, 2011

MF Global Holdings Ltd. Files for Bankruptcy While Its Broker Faces Liquidation and Securities Lawsuit by SIPC, Institutional Investor Securities Blog, October 31, 2011

SEC’s Office of the Whistleblower Received 334 Tips During FY 2011, Stockbroker Fraud Blog, December 8, 2011

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Posted In: Financial Firms , MF Global

November 26, 2011

MF Global Shortfall May Be More than $1.2B, Says Trustee

According to trustee James Giddens, MF Global Inc. may have a greater than $1.2B shortfall in US segregated customer accounts. Giddens has been tasked with overseeing the failed company’s liquidation.

Previously, the estimated shortfall had been $593 million. Now, however, that estimate has likely changed. Giddens says that it will take $1.3 billion to $1.6 billion dollars to distribute 60% of what should have been found in the accounts of customers. He has noted that how much of the assets he can access is not the same as the shortfall amount. Giddens is reportedly close to exhausting the money that he does control.

$5.45 billion in money from customer accounts were frozen on the last day of October, one day after an MF Global unit reported that client funds (Commodity Futures Trading Commission rules say these should have been segregated) had experienced a material shortfall. Parent company MF Global Holdings Inc. then sought bankruptcy protection.

Since then, Giddens has gained control of $3.7 billion from MF Global Inc.’s US depositories. About $520 million in cash is going back to customers while $1.5 billion in collateral has already been distributed.

The SEC, the CFTC, and the US Justice Department are looking at cash movements that took place at the financial firm before it filed for bankruptcy.

According to Bloomberg.com, former FBI director Louis Freeh is now the Chapter 11 trustee in the Mr Global Holdings Ltd. bankruptcy. The appointment comes after creditors and the company called for one person to take charge of recovering assets.

Meantime, US lawmakers plan to take a closer look at the relationship between ex-MF Global Holdings Ltd. Chief Executive Jon S. Corzine, who used to run Goldman Sachs Group Inc., and the credit ratings agencies (Standard & Poor’s, Moody’s Investment Services, and Fitch Ratings) that downgraded the brokerage firm as it moved toward bankruptcy. They want to see if Corzine’s start status may have influenced the rating firms.

It wasn’t until just days before MF Global filed for bankruptcy protection that Fitch and Moody’s reduced their investment grade ratings on the brokerage firm. Moody’s downgraded it to the brink of “junk” on October 24. Standard & Poor’s only downgraded its rating of MF Global after the bankruptcy filing.

Marketwatch recently reported that MF Global clients who want their money back are not taking this situation lying down. A new group, called the Commodity Customer Coalition, is now representing clients with over 7,000 MF Global accounts. Its members are ready to lobby Washington for help. BTR Trading Group principal John Roe, who started the group, says that more than $10 million of his own funds and clients’ monies are somewhere in MF Global.

If you cannot access your money in the wake of MF Global’s bankruptcy filing, please contact our stockbroker fraud lawyers today.

MF Global may come up $1.2B short, trustee says, Investment News, November 21, 2011

MF Global’s Bankruptcy Trustee Set to Be Ex-FBI Director Freeh, Bloomberg, November 26, 2011

MF Global customers taking case to Washington, MarketWatch, November 25, 2011

Rating Firms' MF Global Role to Be Explored, The Wall Street Journal, November 25, 2011

More Blog Posts:
MF Global Holdings Clients Unable to Access Their Money Following Chapter 11 Bankruptcy, Stockbroker Fraud Blog, November 16, 2011

MF Global Holdings Ltd. Files for Bankruptcy While Its Broker Faces Liquidation and Securities Lawsuit by SIPC, Institutional Investor Securities Blog, October 31, 2011

UBS Financial Services Fined $2.5M and Ordered to Pay $8.25M Over Lehman Brothers-Issued 100% Principal-Protection Notes, Institutional Investor Securities Blog, April 12, 2011

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Posted In: Financial Firms , MF Global