MBF clearing sued by CFTC, accused of not segregating funds

March 13 (Bloomberg) -- 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).

Bloomberg News

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