PFGBest’s use of small auditor examined by investigators

The collapse of PFGBest stunned many in the futures industry. But perhaps the news shouldn’t have come as such a shock, according to a new report from Reuters.

In the years leading up to its bankruptcy, the brokerage firm reportedly eschewed the services of large, established auditing firms, instead enlisting a small accounting firm based in a suburban Chicago home to monitor its books. Financial statements from late-2010 show that Veraja-Snelling Co. certified that PFGBest was compliant with regulations concerning segregated customer funds, writing that the “corporation’s practices and procedures were adequate.” On Monday, the National Futures Association (NFA) reported that the brokerage firm may be missing up to $220 million of customer segregated money.

According to several experts quoted in the article, the use of such a small accounting firm should have been a red flag for government regulators, especially considering that PFGBest had more than $500 million in assets. "You would think that a regulator would notice this and that should trigger much higher scrutiny," accountant Tom Selling told Reuters. "There's no question that the regulator's protocol should take that into account, especially a sole practitioner."

In past years, Veraja-Snelling & Co. has also audited the books of securities brokers such as ArcLight Securities LLC and Corporate Investments Group. The NFA noted that the accounting firm has never been the subject of disciplinary action in Illinois, and there is currently no evidence that it engaged in any wrongdoing in this case.

Read more information and analysis at Reuters.

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