Investigators are focusing their attention on two money transfers as they look for $1.6 billion in missing customer funds, following the Oct. 31, 2011 collapse of MF Global Holdings Limited. Those transfers happened during the firm's final days. Many customers, including farmers, ranchers and farm investors, have not been fully reimbursed for hundreds of millions of dollars that were frozen in their accounts as a result of the firm’s bankruptcy.
The rush of activity in MF Global's final days caused many more erroneous trades than the firm would normally have in a similar period, according to James Giddens, the bankruptcy trustee.
Customers Selling Claims
With much uncertainty remaining on when or if money will be recovered, some clients are selling their claims. U.S. clients are getting as much as 88 cents on the dollar. However investors at the British unit of MF Global may not be able to sell for as much. Smaller claims and slower returns in Britain has seen customers in the United Kingdom offered 70% to 77% of face value of claims.
According to James Nicholls, a lawyer specializing in claims trading in London, client account protection in the U.K. doesn't work the way it is supposed to.
Tax forms for clients of MF Global are lacking detailed information on profits and losses, which is making it difficult to fill out tax returns for the Internal Revenue Service. And the deadline for most agricultural producers is approaching very quickly. Farmers who earned at least two-thirds of their income from farming and didn't estimate what they owed in mid-January, must file self-employed returns to the IRS by March 1.
Tax form 1099s are usually sent out by Jan. 31, but the trustee overseeing the MF Global bankruptcy, James Giddens, applied for a 30 day extension to send out some of the 1099s. Even those forms that have been received from accounts that were rolled into other brokerages are lacking data. Many only have data since they were transferred in November without any details of profits or losses during the first 10 months of 2011.
Safeguards Being Explored
The Commodity Futures Trading Commission is convening a roundtable next week to discuss planned policy changes to prevent a situation similar to MF Global in the future. One of the highlights of the plan includes customers being able to keep cash in clearinghouses rather than brokerage firms. There is also a list of several other possible changes such as CFTC keeping a closer eye on self-regulators, requiring brokerage firms to update customers regularly on the safety of their money, and a plan to modify the agency’s bankruptcy rules that govern how customers’ assets are doled out when a firm collapses.