We are one of the world’s leading brokers in markets for commodities and listed derivatives. We provide access to more than 70 exchanges globally and are a leader by volume on many of the world’s largest derivatives exchanges. We are also an active broker-dealer in markets for commodities, fixed income securities, equities and foreign exchange. We are one of 20 primary dealers authorized to trade U.S. government securities with the Federal Reserve Bank of New York.
The aforementioned caption is what investor read in MF Global’s Prospectus Supplement in August 2011.
MF Global issued $325 million of 6.250 percent 5-year senior notes in August 2011. The deal was led by investment bank Jefferies and co-managed by investment banks Bofa Merrill Lynch, BMO Capital Markets, COMMERZBANK, Natixis, Lebenthal & Co., LLC, Sandler O’Neill + Partners, L.P. and US Bancorp. I provide this backdrop because you have to see that once again those who have a fiduciary responsibility to protect investors failed. The banks on this deal are underwriters of securities who are obligated to perform due diligence on the issuer (MF Global) to protect investors. I have no doubt that the bankers performed their due diligence on the objective facts about the company -- like financial statements, management background, market share, customers, etc. But did the bankers adequately assess the character of MF Global’s management? Is it possible for a banker to protect investors from managers with impeccable credentials who are willing to take reckless risks with other people’s money?
Rating agencies, rating agencies, rating agencies sounds familiar again, eh? Moody’s, Fitch and S&P once again did not meet their fiduciary responsibility to investors. How can a bond deal be executed in August and the company files for bankruptcy shortly thereafter? Like the bankers, the rating agencies surely did their analysis on the objective data. However, can they warn investors about reckless management?
The facts are that on October 25th Jon Corzine stated he was confident that MF Global would successfully manage its $6.3 billion exposure to European debt (Spain, Portugal, Belgium and Italy). Yet one week after a failed attempt to sell the company, MF Global filed for Chapter 11 bankruptcy on October 31st 2011.
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