MBF Clearing describes itself as:
"widely-recognized for our preeminent role within the global futures markets, and for being one of the Industry’s leading futures commission merchant (FCM). Our status in 2012 has changed from Clearing to Non Clearing FCM with a clearing relationship with FC Stone.
Our presence extends across all major exchange-traded futures markets, including energy, metals, soft commodities, currencies, interest rates, and equity-related indexes.
MBF provides the gateway to a wide menu of major market centers, and we play an integral role supporting the industry’s most demanding exchange-based traders, premiere hedge fund managers, financial institutions, and a select group of highly-sophisticated retail customers...
MBF Clearing Corp. is particularly well-known for supporting a significant number of professional floor traders, “upstairs” fund managers, and boutique trading firms, including The Fisher Proprietary Trading Group, an elite team of 75+ traders and quantitative analysts that are renowned for their prowess and their disciplined incorporation of the ACD Methodology, a quantitative approach to trading a wide variety of liquid markets."
I wonder if this is more a procedural error, and the money was in fact held safely in government securities on behalf of customers, who received the full benefit of their funds. Or was it some variant of illegal hypothecation in support of MBF's own proprietary trades.
If MBF had gone bust, could the monies may have been lost? Were they pledged as collateral? MF Global was certainly not benign at all in their misuse of customer funds, a nice way of saying it was theft, completely mispricing the risk for the customers and taking the differences for themselves.
In other words, MBF may indeed be 'sloppy,' but MF Global was certainly much more than that. It is nice to see that the CFTC is doing something. I wonder how they found out? A little help from their friends?
How is the lawsuit the CFTC filed against MF Global going? Or have they even filed one?
We will have to wait and see.
Bloomberg
MBF Clearing Is Sued by CFTC Over Claims Customer Funds Weren’t Segregated
By Patricia Hurtado
March 13, 2012
MBF Clearing Corp. was sued by the Commodity Futures Trading Commission and accused of failing properly to segregate customer accounts from its own and of violating the Commodity Exchange Act.
MBF employees from September 2008 to March 2010 deposited $30 million to $60 million in customer funds into a U.S. government money market fund at JPMorgan Chase & Co. without properly segregating them, the CFTC alleged today in a complaint in federal court in New York.
The funds were not properly titled, and redemption provisions didn’t comply with CFTC regulations, the agency said. Nor was there proper documentation for the account, it said. MBF also allegedly failed to obtain customer segregation acknowledgement letters on two accounts holding funds for foreign customers from February 2007 to April 2010.
“MBF failed to diligently supervise its employees and agents,” the CFTC said in the complaint. “MBF did not have any written policies or procedures governing the opening and maintenance of customer segregated accounts.”
The firm was accused of failing to maintain sufficient funds in segregation on approximately 322 business days from Oct. 3, 2008, to March 26, 2010.
The CFTC asked for a court order barring MBF’s “unlawful acts and practices” and unspecified civil penalties.
Quinlan Murphy, a lawyer representing MBF Clearing Corp., didn’t immediately return a call seeking comment about the lawsuit.
New York-based MBF Clearing Corp. describes itself on its website as a purchaser and seller of commodities futures contracts and says it was founded in 1987.
The case is CFTC v. MBF Clearing Corp., 12-cv-1830, U.S. District Court, Southern District of New York (Manhattan).
