James W. Giddens, the Trustee for the liquidation of MF Global Inc., and his staff are working closely with the Securities Investor Protection Corporation (SIPC), the Commodities Futures Trading Commission (CFTC), the Securities and Exchange Commission (SEC), and also with the Chicago Mercantile Exchange (CME) and other exchanges. Since the liquidation process was initiated on October 31, 2011, the Office of the Trustee has made significant progress.
The Trustee’s team is working to get money back to customers as quickly as possible following the failure of MF Global Inc., and is facing several circumstances as it works toward that goal: there was no single purchaser for MF Global Inc.’s commodities or securities accounts, the books and records require further analysis and reconciliation, and there is an apparent shortfall of segregated customer property. Nevertheless, distributions to nearly all of the 38,000 MF Global Inc. former commodities clients will have been made within weeks of the bankruptcy filing.
• OPEN POSITION ACCOUNT TRANSFERS: The Trustee obtained court approval for and moved 14,500 accounts with 3 million open positions, along with $1.5 billion in collateral, approximately 60% of collateral for those positions. Customers, upon notification of transfer, had immediate access to their accounts.
• CASH-ONLY ACCOUNT TRANSFERS: The Trustee obtained court approval for a second bulk transfer, currently underway, to move a percentage of deposits in 23,300 accounts holding cash-only as of the filing date of the bankruptcy. As previously noted, the process is underway and its success requires finding Futures Commission Merchants to process the transfers.
• NEXT TRANSFERS: The Trustee is planning a third phase of transfers to “true-up” the value of all claimants’ distributions to 60% of the “net equity” of their accounts, including a few hundred accounts not included in the first two bulk transfers. Distributions may be made by bulk transfer, if feasible, and through an individual claim process.
• SECURITIES CLAIMANTS: Ever since his court appointment, the Trustee and his staff have continued to explore a bulk transfer of all securities accounts. This is dependent on identifying another broker-dealer willing to take the accounts. To date, several broker-dealers have and continue to conduct due diligence, but unfortunately no transferee has agreed to take the accounts. The Trustee is continuing to seek a willing transferee.
• CLAIMS PROCESS: The Trustee moved within two weeks of his appointment to establish an expedited claims process. The Trustee recently held a meet-and-confer session with counsel for parties who had specific suggestions for the expedited claims process. To assist in the prompt processing of claims, the Trustee is working with his professionals to establish an online claims form, and, in the meantime, the Trustee will be making PDF claims forms available on his website (www.mfglobaltrustee.com) and will be mailing paper forms to former customers of MF Global Inc. The Trustee is seeking court approval of the claims process and a hearing on the matter will be held in the U.S. Bankruptcy Court of the Southern District of New York on Tuesday, November 22, 2011, at 3 PM.
• INVESTIGATION: The Trustee’s staff is also working to understand the apparent shortfall in customer funds. This includes a deliberate, thorough, and independent investigation of the complex cash movements made by MF Global Inc. prior to its liquidation. All efforts are conducted under the supervision of the Bankruptcy Court and are coordinated with the United States Department of Justice, the CFTC, the SEC, and SIPC.
• TRUSTEE’S STAFF: The Trustee has assembled a professional staff consisting of experienced legal counsel, forensic accountants and other expert consultants with liquidation experience. The Trustee’s staff includes professionals from Hughes Hubbard & Reed, all of whom have broker dealer liquidation experience. They are overseeing and supervising 100 Deloitte consultants and 60 Ernst & Young forensic investigative accountants and consultants, and a staff of 190 former MF Global employees. This team shares vast experience in commodities brokers and stockbroker liquidations, forensic accounting, and technology consulting.
In addition, the Trustee’s expert staff has also been working side-by-side with the SEC, SIPC, the CFTC, the CME, and other self-regulatory organizations and derivative clearing organizations. The staff of these organizations has been providing additional industry knowledge and assisting the Trustee in structuring and completing the bulk transfers. The Trustee has also welcomed suggestions and advice from other knowledgeable parties in the futures, options and commodity industries.
The Trustee understands the frustration of many former MF Global Inc. customers. The Trustee and his staff have responded to thousands of phone calls, letters and other correspondence from customers and creditors, and will continue to do so. The Trustee’s goal remains returning as much customer property as possible, as quickly as possible, in a manner that is fair to all customers and that is consistent with the law.
Customers and others are urged to continue visiting the website, www.mfglobaltrustee.com, which will remain the primary and most efficient means of providing timely and accurate information concerning this liquidation.