Liquidation for MF Global Underway

Jack Humphrey, Regulatory journalist
November 02, 2011 /

The Securities Investor Protection Corporation (SIPC), which maintains a special reserve fund authorized by Congress to help investors at failed brokerage firms, has set out with the liquidation of MF Global Inc., under the Securities Investor Protection Act (SIPA).

In a filing with the United States District Court for the Southern District of New York, the SIPC maintained that the customers of MF Global Inc. are in need of the protections available under the SIPA.

“For several days, the SEC, CFTC and other regulators had been closely monitoring developments affecting MF Global, Inc., a jointly registered futures commission merchant and broker-dealer, in anticipation of a transaction that would include the transfer of customer accounts to another firm,” the SIPC and the US Securities and Exchange Commission said in a joint statement.

The regulators added: “MF Global informed the regulators that the transaction had not been agreed to and reported possible deficiencies in customer futures segregated accounts held at the firm. The SEC and CFTC have determined that a SIPC-led bankruptcy proceeding would be the safest and most prudent course of action to protect customer accounts and assets.”

The United States District Court for the Southern District of New York granted the application and appointed James Giddens as trustee for the liquidation, and further appointed the law firm of Hughes Hubbard & Reed as counsel to Mr. Giddens.

Giddens has been authorized to operate the business of MF Global Inc. to conduct business in the ordinary course until 6pm on November 3, 2011; complete settlements of pending transactions; and take the necessary steps for the orderly transfer of customer accounts and other properties, according to court documents.

In an order issued by Judge Paul Engelmayer, the trustee has the mandate to take possession of the property of the MF Global. The trustee is further ordered to open accounts and obtain a safe deposit box at a bank he will so choose.

Orlan Johnson, board chairman of the Securities Investor Protection Corporation (SIPC), said: “When the customers of a failed SIPC member brokerage firm have left their securities in the custody of that firm, SIPC acts as quickly as possible to protect those customers. In this case, SIPC initiated the liquidation proceeding within hours of being notified by the SEC that a SIPC case was necessary to protect the investing public.”

The trustee is charged with giving notice of the proceeding and mailing claim forms to the customers and other creditors of the firm.

On November 1, the High Court in UK appointed KPMG administrators to wind up the trading of MF Global UK Limited, a Special Administration Regime approved by the Financial Services Authority.

“The UK and overseas operations of MF Global UK Limited have ceased trading and the joint special administrators are working with the regulatory authorities, clearing systems and other counterparties in relation to the orderly wind down of the trading operations,” said Richard Fleming, one of the KPMG administrators.

The case will be referred to the United States Bankruptcy Court for the Southern District of New York.

 

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