Not only did MF Global fail but the regulators’ response to this crisis was embarrassingly slow and inadequate. While the commission contends that its customer priority rules remain intact despite the liquidation being executed by a Securities Investor Protection Corp. (SIPC) trustee under the Securities Investor Protection Act (SIPA), those priority rules are continuously being challenged by parent company MF Global Holdings’ trustee Louis Freeh. This arguably could have been avoided if CFTC attorneys stood up at a Nov. 1 hearing and did their job of looking out for the industry. But when an attorney for MF Global told the judge there was no shortfall, no one stood up. Maybe CFTC counsel had position limits on the brain.
But one business day after the ruling came out; Chilton stated in a speech he delivered Tuesday to a UN Group in Rome that the Commission should appeal the decision. Chilton wrote, “We should start drafting yet another rule proposal to address any concerns the Court had, drafted in a way that satisfies the objections raised by the court. I am confident we can do so. Any additional proposal should be done on an expedited time frame. We already know what most folks think.”
Chilton may think he knows what people think but most people I talk to think the CFTC failed the industry in the way it mishandled the MF Global debacle, a debacle that is ongoing and approaching its one-year anniversary. And what does Chilton mean by “drafted in a way that satisfies objections?” The question before the court was whether Dodd-Frank mandated spec limits or if the CFTC first must prove there is evidence of excessive speculation before instituting them.
No doubt Chilton had a “focused” audience as the speech is to a UN group. The UN put out one of the nuttiest studies on the subject a year ago where they promoted government intervention into commodities markets similar to the way central banks manipulate interest rates to support monetary policy, in order to “help market participants to better recognize the fundamentals.”
Twice in a year’s time customer segregated funds were violated. Many customers have lost confidence in the markets and the ability of regulators to protect their money. The Chairman of the CFTC recused himself from the MF Global investigation after thoroughly botching it in the first few days and customers still have not been made whole.
“Chairman Gensler, Commissioners Chilton, Sommers, O’Malia and Wetjen — focus.”