I put up a column on Tuesday at Forbes.com that explains, in theory, what I think happened to MF Global’s missing $600 million in customer assets. It’s hard to describe the reaction to the story without jumping up and down and clapping. There’s so much interest in the subject and so little information being provided by mainstream media.
Here in Chicago, everyone is mad and no one knows who has the answers.
MF Global’s auditor is PricewaterhouseCoopers, who inherited the client when Man Financial, also a client, spun off the brokerage firm in 2007.
Almost everyone wondering where the missing MF Global customer assets have gone thinks they will show up eventually.
I believe the assets are long gone.
Unlike the shell game, there is no bean under the MF Global dixie cup. The mixed bag of marketable securities taken from customer segregated accounts, used most likely to meet margin calls and satisfy “important” customers closing accounts during the last days, will, in my opinion, never be seen again.
Too much time has passed for anyone to still reasonably expect that the “discrepancy” is just a timing difference or a misallocation between accounts, according to several sources who prefer to remain anonymous because of the sensitivity of the situation. All of the statements made on the record by those in a position to know point to assets taken out of the firm and now gone for good.
CFTC in bankruptcy filing October 31 according to The Financial Times: The CFTC, in a court filing, revealed MF Global’s general counsel Laurie Ferber emailed the regulator at 7.18pm Monday – hours after the bankruptcy filing – to say that it had “discovered a significant shortfall in its segregated funds account”.
Joint statement of CFTC and SEC on November 1: “Early this morning, 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 CME Group on November 2: “CME completed its on-site review last week. [Reportedly Monday.] At that time, the results of our review indicated that MF Global was in compliance with its segregation requirements. It now appears that the firm made subsequent transfers of customer segregated funds in a manner that may have been designed to avoid detection insofar as MF Global did not disclose or report such transfers to the CFTC or CME until early morning on Monday, October 31, 2011.”
Read the rest at Forbes.com, MF Global Assets Have Left The Building: How, When, Where.
Other stories of mine about this issue include:
October 31, 2011 MF Global : 99 Problems And Auditor PwC Warned About None
At American Banker:
Auditor PwC Should Have Been on Top of MF Global
November 4, 2011 If MF Global commingled client funds, it would be PwC’s fault as much as Jon Corzine’s.
Are Cozy Ties Muzzling S&P on MF Global Downgrade?
October 28, 2011 Jon Corzine’s old ways got his firm into trouble. Now he’s hoping old ties will bail it out.
Main page image, “Elvis has left the building” by Simon Crubellier.