CFTC asked to rule on handling separate accounts

AP News
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Posted: Nov 22, 2011 3:17 PM
CFTC asked to rule on handling separate accounts

A Federal regulator is being asked to spell out more clearly rules for when securities firms can mingle money from different clients' accounts.

The request comes weeks after the collapse of MF Global, which is being investigated by regulators over whether it diverted hundreds of millions in client money after its bad trades made from the firm's own account triggered a large quarterly loss at the firm.

The Commodity Futures Trading Commission, which regulates securities firms, received the request for the rules from ICE Clear Credit, a division of derivatives exchange IntercontinentalExchange. ICE Clear Credit clears complex trades for securities firms.

MF Global collapsed after making a disastrous bet on European debt. It filed for bankruptcy protection on Oct. 31.

Jon Corzine, the former New Jersey governor and U.S. senator, led the firm until earlier this month.

A court-appointed trustee overseeing MF Global's bankruptcy said Monday that up to $1.2 billion was missing from customer accounts, double what the firm had reported to regulators last month.

The CFTC and other regulators are investigating whether the firm used money from clients' accounts as its own financial condition worsened. That would be a violation of securities rules. The FBI is also investigating whether MF Global violated any criminal laws.

Roughly 120 U.S. firms trade futures, including major Wall Street banks. Federal rules require customers' money to be kept separate from the firms'.

The CFTC has asked for comments on the ICE request by December 22.