Anyone pulling money out of MF Global?

Giddens will get his pound of flesh. The longer this takes, the more he makes, see Lehman Brothers:

Giddens, in a court filing last month, said he has gathered some $20 billion in the Lehman case and his goal is to “make a substantial distribution on customer claims, and to make interim distributions when it is possible to do so, possibly as early as the spring of next year.”

The bulk of the $642 million in expenses in the case have gone to consulting and financial advisory fees, according to the Oct. 21 court filing. Giddens and Hughes Hubbard have been paid about $169 million. They’ve been working on the liquidation of Lehman Brothers Inc. since September 2008, shortly after the brokerage’s parent company filed the largest bankruptcy in U.S. history.

In their letter, Royce and Garrett said the “lack of progress” in that resolution “raises questions regarding what is expected of the trustee and the process by which these fees are approved.”

http://www.bloomberg.com/news/2011-...lobal-trustee-s-work-on-lehman-brokerage.html
 
Quote from Ghost of Cutten:

Nasty stuff, could this even be classed as criminal activity? Fraud or at least negligence, if they sent cheques instead of wires, or deliberately delayed transfers, or simply fucked them up.

Seems like in future, when a broker is in trouble, would be best to send a threatening email/letter from a BigLaw firm inferring potential criminal charges, jail time, and personal liability to the employees if they don't get your money transferred asap without errors. Low-paid back-office staff and middle managers will probably give priority to someone kicking up credible fuss, in a bid to keep themselves safe.

28 October was only 3 days after it became obvious MF was in trouble (25th was when the stock puked >40% in one day) - so that emphasises how important it is to have a price alert on your broker's stock, and react immediately if something funny looks on the cards.
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If you do that they'll probably forward it to their attorneys. Maybe you would be better served getting someone with power of attorney and going into their offices, picking up the check, and walking to their bank to cash it.
 
From the above attachement (CME memo): "When the verification process is
completed and we confirm that all monies and positions have been transferred correctly,
customers will be given access to cash in their accounts."

Well, that's at least encouraging - it sounds as if each customer's share of the 11% or so that is missing may be tied up for a while - but it's MUCH better than having the 100% tied up until the entire debacle is over . .
 
Quote from ddouglas:

From the above attachment (CME memo): "When the verification process is
completed and we confirm that all monies and positions have been transferred correctly,
customers will be given access to cash in their accounts."

Well, that's at least encouraging - it sounds as if each customer's share of the 11% or so that is missing may be tied up for a while - but it's MUCH better than having the 100% tied up until the entire debacle is over . .
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I read that differently. It sounds like *only* the customers whose account have been moved because they already had open positions will get access to that cash/positions. Remember, it's all frozen until the end of today-Tuesday.

The cash only flat people like me get this:

<i>CME Group will continue to work diligently with the Trustee and authorities to assist in the recovery of any misused customer funds and secure a distribution or partial distribution at the earliest time.</i>

Which doesn't tell us anything other than 'we're looking for the lost money. Sit tight.'
 
I received communication from my MF Global broker. It referenced the following web links:

Mfglobaltrustee.com
SIPC.com

There have been significant additions to the trustee website since yesterday. The SIPC website provides access to forms that can be completed on-line, but must be downloaded and mailed to the court appointed liquidation trustee. It's aggravating that two calls to trustee's call center could yeild these simple instructions. There have been several comments in this thread regarding what protections are offered by SIPC. The following is taken from their website:

http://sipc.com/claim/claimsprocess.cfm

What You Need to Know About the Claims Process

Understanding the claims process rules is the key to protecting yourself...and your money. Here are key things to consider:

Investors eligible for SIPC help. Although not every investor is protected by SIPC, SIPC aids most customers of failed brokerage firms who are owed cash and securities missing from customer accounts.

Investments protected by SIPC. The cash and securities – such as stocks and bonds – held by a customer at a financially troubled brokerage firm are protected by SIPC. Among the investments that are NOT protected by SIPC are commodity futures contracts and currency, as well investment contracts (such as limited partnerships) and fixed annuity contracts that are not registered with the U.S. Securities and Exchange Commission under the Securities Act of 1933.

Terms of SIPC help. Customers of a failed brokerage firm get back all securities (such as stocks and bonds) that already are registered in their name or are in the process of being registered. After this first step, the firm’s remaining customer assets are then divided on a pro rata basis with funds shared in proportion to the size of claims. If sufficient funds are not available in the firm’s customer accounts to satisfy claims within these limits, the reserve funds of SIPC are used to supplement the distribution, up to a ceiling of $500,000 per customer, including a maximum of $100,000 for cash claims. Additional funds may be available to satisfy the remainder of customer claims after the cost of liquidating the brokerage firm is taken into account.

How account transfers work. In a failed brokerage firm with accurate records, the court-appointed trustee and SIPC may arrange to have some or all customer accounts transferred to another brokerage firm. Customers whose accounts are transferred are notified promptly and then have the option of staying at the new firm or moving to another brokerage of their choosing.

How claims are valued. Typically, when SIPC asks a court to put a troubled brokerage firm in liquidation, the financial worth of a customer’s account is calculated as of the “filing date.” Wherever possible, the actual stocks and other securities owned by a customer are returned to them. To accomplish this, SIPC’s reserve funds will be used, if necessary, to purchase replacement securities (such as stocks) in the open market. It is always possible that market changes or fraud at the failed brokerage firm (or elsewhere) will result in the returned securities having lost some – or even all – of their value. In other cases, the securities may have increased in value.
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The above seems to parallel CFTC's position regarding equitable distribution of any shortfall in segregated funds across all account holders. Per the above it looks like SIPC coverage is limited for cash shortfalls to a maximum of $100k per account holder. We're all living in a pretty gray world at this point. If you want to get a headache, start reading the documents posted under the "Docket" section on the trustee website.

Basically the MF Global brokerage ceased to exist as of the bankrupcy filing. So we all have to be a bit careful with statements made by remaining MF Global staff as regards our funds or next steps. The trustee controls everything at this point. The more separate legal filings accumulate in the matter, the longer it's going to take to resolve. All customers should have the same legal standing here, but of course that is exactly what the lawyers will wind up arguing about.
 
Quote from steve0617:

I read that differently.
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You could be right, but I take it this way:

Company assets are subject to bankruptcy proceedings. Because of the co-mingling of some customer funds with company assets, a certain percentage of customer money is subject to legal wrangling as to whose money it is.

However, there is still money in segregated accounts - not all of it has gone missing. The ownership of these accounts is not in dispute, and not a company asset - therefore not subject to bankruptcy proceedings prior to release. The Trustee, I believe, is legally obligated to disburse & clear-out the non-disputed funds as quickly as is reasonably possible, before moving on to settling ownership claims on company assets.

I.e., If you lent $350 million to MF Global last week, that does not give you the right to make a claim on customer segregated accounts, just because you see cash lying around in there - you have to make your claim against company assets.

Again, I'm no lawyer, but that's my understanding of the following sentence:

"The Trustee is
required to ensure a fair and equitable distribution of that property. In the ordinary course, he
will reduce all assets, including securities, letters of credit, warehouse receipts and other
delivery certificates to cash, and make a pro-rata distribution among the commodity customers based on their relative account balance."

Notice it speaks of distribution of cash amongst customers - not lenders, bondholders, creditors' claims, etc.

I'm not saying you're wrong - I just interpret it a little differently.

What's the alternative? Keeping customer-segregated accounts tied up for years? I just don't see the industry being able to survive that. CME would probably file suit right away - that's a MASSIVE threat to their long-term survival. No one will trade futures (institutions or individuals) if customer seg accts become subject to claims on company assets.

Maybe I'm a little more optimistic than you, because I don't have any money tied up in this . .
 
Quote from ddouglas:

You could be right, but I take it this way:

Company assets are subject to bankruptcy proceedings. Because of the co-mingling of some customer funds with company assets, a certain percentage of customer money is subject to legal wrangling as to whose money it is.

However, there is still money in segregated accounts - not all of it has gone missing. The ownership of these accounts is not in dispute, and not a company asset - therefore not subject to bankruptcy proceedings prior to release. The Trustee, I believe, is legally obligated to disburse & clear-out the non-disputed funds as quickly as is reasonably possible, before moving on to settling ownership claims on company assets.
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Like you, I'm not a lawyer. But keep in mind that there are two separate bankruptcies in progress here. A bankruptcy of the parent company and a bankruptcy of the brokerage unit. The brokerage was placed into bankruptcy to in part protect existing customer funds. This is why all accounts were (and are still) frozen. Accounts with active positions were transferred and / or liquidated. The rest of customer funds appear to be part of the bankruptcy process at minimum to insure equitable distribution based on an accurate accounting of the actual short fall in customer funds. There seems to be a lot of bounced checks out there if you believe whats being reported in the press. Unfortunately this may alter the size of the shortfall in customer funds. I would not want to share in either the loss or gain of open positions of other account holders.

I want to believe that the back office records that the trustee has access to are in pretty good shape. If I were guessing, those records will probably need to be vetted against account holder claims to insure accuracy before a final "hair cut" % can be determined. Any losses related an inability to access open positions is a whole other matter. SIPC clearly has no obligations to address this. It also seems fair that the losses of account holders with open positions should not have any bearing on the final 'haircut' we are all going to get (excluding any SIPC coverage for cash balances on deposit at the brokerage).

I really feel for the folks who couldn't liquidate positions. It an issue all traders are going to have to plan for going forward. I think it's fair to assume at this point that fund segregation does not mean that each account holders funds were in separate deposit accounts at the broker custodial bank(s). If this were the case resolution would be very simple and straight forward. We must rely on the integrity of the back off system, and any documentation we can provide to validate our individual claims.
 
Quote from FreeMarketRider:

I really feel for the folks who couldn't liquidate positions. It an issue all traders are going to have to plan for going forward.
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Yes, definitely - and yet another argument for having a back-up broker, where you could take opposite positions, & theoretically be 'flat' while riding-out the transfer process.

(though I realize it doesn't work exactly like this in real life - at least you would have SOME kind of exposure-protection).
 
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