Regulators Investigating MF Global

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r87okdoo
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Joined: Mon Oct 31, 2011 9:16 pm

Regulators Investigating MF Global

Post by r87okdoo » Wed Nov 02, 2011 5:43 pm

[b]Regulators Investigating MF Global[/b]
Federal regulators have discovered that hundreds of millions of dollars in customer money have gone missing from MF Global in recent days, prompting an investigation into the company’s operations as it filed for bankruptcy on Monday, according to several people briefed on the matter.
The revelation of the missing money scuttled an 11th hour deal for MF Global to sell a major part of itself to a rival brokerage firm. MF Global, the powerhouse commodities brokerage run by Jon S. Corzine, had staked its survival on completing the deal.
Now, the investigation threatens to tarnish the reputation of Mr. Corzine, the former New Jersey Governor and Goldman Sachs chief who oversaw MF Global’s demise, making it the first American victim of Europe’s debt crisis.
What began as nearly $1 billion missing had dropped to less than $700 million by late Monday. It is unclear where the money went, and some money is expected to trickle in over the coming days as the firm sorts through the bankruptcy process, the people said.
But regulators are examining whether MF Global diverted some customer money to support its own trades as the firm teetered on the brink of collapse. If that was the case, it could violate a fundamental tenet of Wall Street regulation: Customers’ money must be kept separate from company money.
Such a finding would move the discussion from sloppy internal controls at MF Global to something more troubling. While the investigation is in its early days, it raises the specter that regulators could sanction the firm or the employees responsible.
MF Global and Mr. Corzine have not been accused of any wrongdoing.

zmktwzrd
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Re: Regulators Investigating MF Global

Post by zmktwzrd » Fri Nov 04, 2011 6:28 pm

Corzine really blew it! Anybody who has spent more than 5 minutes in the trading business knows that you don’t risk more than you can afford to lose. Most professional Commodity Trading Advisors risk less than 5% of their entire portfolio on any given bet; our managed futures fund (who has over 8 million dollars at MF Global) routinely risks less than 2% of our portfolio on any given bet. This guy (Corzine) is supposed to be a cream of the crop trader from Goldman Sachs, and he acts like a drunken tourist in Las Vegas putting a 200+ year old company all on red!? This is beyond a bad bet; this is sheer recklessness and gross negligence!

Then to add insult to injury, people at his firm apparently steal customer segregated funds to cover his bad bets! Criminal, if this turns out to be true Madoff is going to have some new cellmates!

In my opinion this makes a case for people investing with a Commodity Trading Advisor to utilize notional funding as much as possible. Basically notional funding is a way to put as little of your cash as possible at risk at a given financial institution (Like MF Global). It is sometimes referred to as the margin to equity ratio.

Let's hope the punishment fits the crime for Corzine (and whoever else is involved) and Wall Street finally gets the message to stop using excessive leverage and risk with other people's money!

Dean Hoffman

http://www.hoffmantrading.com

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