MF Global Australia - What are you doing?

[gibson 787]

This approach by segments of clients is by nature divisive, confrontational and much more prone to internal fighting among clients - which is precisely the ideal conditions for lawyers and Administrators to take over and burn all the money in fees

This client dividing process sends shivers up my spine. Divisiveness is absolutely the last thing we need.

The truth is, we all signed our agreements knowing that there could be a shortfall in our account. I am one of those who did not have an open position and do not expect any financial favours.

I vehemently stress to you all, that we as clients need to reach consensus on all issues and keep the legal and administrative professions out of this. As I see it, there are 3 categories of clients -
1. those who were not trading
2. those who were trading and ended up with a loss
3. those who were trading and ended up with a win

At the end of the day, all 3 categories could have issues with the outcome. My advice is cop it on the chin and take what is there in as short a time as humanly possible. DON'T LET GREED AND SELFISHNESS CANCEL OUT INTELLIGENCE AS IT DID WITH A CERTAIN MR CORZINE. In other words, don't let admonistrators/lawyers decide the destiny of our hard earned.

I've been on this earth for over 60 years and have been involved on both sides of the fence in issues very similar to this one. There is only one objective for both the administrators and lawyers, and that is to string this out for as long as possible in order to maximise their profit. They are businesses for profit, just like woolworths or Westpac etc. They are not your friends and do not have your interest at heart!

For us to reach consensus, we have to be able to communicate collectively via email. We know the administrators have the ability to do this, but I'm not so sure they'll be willing to share such ability. Maybe they can be legally forced to, I'm not sure.

What is urgently required are some ideas on how communication can be achieved amongst all clients. Possibly we may have to establish an independent website. I think I may have read here that one is underway.

 

[landon]

Todays Sydney Morning Herald


MF Global fiasco makes case for better client protection
Adele Ferguson
December 19, 2011

More than six weeks after the spectacular world-wide collapse of MF Global, the $313 million pot of Australian client money remains frozen with little hope of a full recovery, as the liquidators, lawyers and regulators try to unravel poor regulatory decisions made worse by the complex world of derivative trading, counterparty risk and the pooling of client money.

Australia's situation is in embarrassingly sharp contrast to some other countries, including Canada, which have been able to repay speedily some or all of client monies.

Part of the problem is due to shortcomings in the regulatory and legislative framework, as well as a decision to grant MF Global an exemption so it could use its British business as the market participant in Australia rather than its Australian business.
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It can be revealed this decision has left $34 million of Australian client money in limbo as a legal minefield is set to erupt. The British administrators are expected to argue the funds technically belong to MF Global UK, while the Australian administrator, Deloitte, believes they belong to Australian clients. Until the turf war is sorted out, the Australian Securities Exchange (ASX) has refused to hand over the money.

Put simply, while clients are owed $313 million, there is $232 million in the bank, leaving $81 million outstanding, which is owed by various counterparties. This includes $10 million in MF Singapore, $13 million in contracts for difference (CFDs), $5 million in margin foreign exchange and $1 million in online foreign exchange.

Given the complex situation, coupled with the exemption the Australian Securities and Investments Commission gave to MF Global in Australia, the administrator Deloitte and the law firm Blake Dawson Waldron will have to go to court next year to sort out the mess and get a ruling on how exactly to calculate and return funds.

MF Global collapsed on October 31 after it was forced to reveal it had made a $US6.3 billion bet on European sovereign debt. Some of $US1.2 billion in client money is believed to have been lent to its European affiliate to stave off insolvency. Here lies the problem. Derivatives such as CFDs - one of the key product offerings of MF Global - mostly are traded in the murky and largely unregulated over-the-counter-market, which allows organisations such as MF Global to take client money and pool it into one big account. It is a business model which results in the client becoming an unsecured creditor if the company collapses.

In some cases, these businesses use pooled client funds to meet their daily business obligations in connection with margining, guaranteeing, securing, transferring, adjusting or settling dealings in derivatives. It was this business model that was adopted by Tricom, Opes Prime, Sonray, Chartwell and many other companies in sensational collapses or near-collapses in the past few years.

According to latest Australian Financial Markets Association data, the over-the-counter market turned over $78.1 trillion in the year to June 30, compared with $$49.7 trillion for the total exchange-traded markets, which include the ASX and the Sydney Futures Exchange.

What happened at MF Global can happen again and again until regulators and the government address the issue. I have been highlighting the risks associated with the pooling of client funds since early 2008, when Tricom almost collapsed, followed by the collapse of Opes Prime. Two years later, on July 13 last year, when ASIC came out, guns blazing, with a regulatory guide relating to over-the-counter derivatives, I pointed out that, in the guide, ASIC had failed to deal with the riskiest aspect of these products: a client's money is pooled into one account, the client money can be used for purposes unrelated to that client and, if the company goes under, the client becomes an unsecured creditor.

The MF Global collapse has prompted the government to at least acknowledge the issue with the release of a consultation paper on client monies. It has set a deadline of January 27 for submissions, which covers a period when most people will be on holidays.

The risks of operating in the over-the-counter market are made worse because Australia doesn't have a compensation fund when things go bad. Canada has the Canadian Investor Protection Fund, which has come to the rescue. The futures exchange CME Group in the US has guaranteed $US550 million to the bankruptcy trustee of MF Global to increase the payout from 60 per cent to 75 per cent. In Britain, clients will be paid compensation of up to £50,000 ($77,800) per customer, and administrators have asked customers to make formal claims immediately and will make an interim payment within 14 days of approval, with the aim of completing these before March.

In Australia it is understood no client funds will be returned before April - at the earliest. Customers are yet to be given their closing balance or indication of how much is likely to be returned. Indeed, a court will have to decide this.

It is a situation becoming explosive as some clients get perilously close to collapse the longer it takes. The lawyers and administrators are doing all they can to speed the process. But the longer it takes, the more money they charge and the less clients get. Let's hope this finally gets the government off its backside to make needed changes, including the introduction of a compensation fund.

Read more: http://www.smh.com.au/business/mf-g...-protection-20111218-1p0ry.html#ixzz1gvdCmSu2

 

[hatton01]

If I can summarise from all of the posts, the biggest concern expressed by everyone at this point, is the distribution will be delayed as we wont be able to come up with a single consensus view on the method of distribution ?

What if we signed over something to the Administrator which said we will signoff to any decision agreed to by our Reps on the CC on our behalf in terms of distribution (ie: a proxy vote on the distribution method) ? This would not be hard to implement.

 

[Trader101]

If I can summarise from all of the posts, the biggest concern expressed by everyone at this point, is the distribution will be delayed as we wont be able to come up with a single consensus view on the method of distribution ?

What if we signed over something to the Administrator which said we will signoff to any decision agreed to by our Reps on the CC on our behalf in terms of distribution (ie: a proxy vote on the distribution method) ? This would not be hard to implement.

Hi Hatton
My biggest concern is that it's not the client’s job to come up with a methodology for distribution.

It's the administrators job to do this and to do this quickly and by the letter of the law. In HK KPMG has done this in a much short time then Deloittes and I am interested to know the reason for this.

You are never going to get all of the 50,000 clients to agree on one distribution method (that is a waste of time and money). This is why we hire an administrator in the first place, to make these decisions and push them through the courts. And I want Deloittes to explain to everyone in their next newsletter why they can’t make these decision as KMPG in HK can.

 

[hatton01]

Hi Trader101,

I agree with you a 100%. That's why I eluded to the Reps on the CC.
When the Admin presents his methodology this Fri (22 Dec) they will need to be of one voice. Hoever at the end of the day the Admin will have the final say guided as you point out by the legal position. I doubt very much of a big legal battle over this as there will be some clear legal framework to do the distribution.

There has been a fair bit of negative comments made against Administrators in general (myself included).

However if you look at the Sonray case which happened in June 2010 where the clients were told they would get 25-30 cents in the dollar (CEO went to jail) are now according to news reports going to receive 69 cents. A lot of the credit must go to the Administrator who managed to get some of the parties to provide funds to pay the clients in return for not taking legal action. The Administrator in this case did not eat into the "Client segregated funds" as there would be nothing left by now.

 

[Trader101]

Hi Trader101,

I agree with you a 100%. That's why I eluded to the Reps on the CC.
When the Admin presents his methodology this Fri (22 Dec) they will need to be of one voice. Hoever at the end of the day the Admin will have the final say guided as you point out by the legal position. I doubt very much of a big legal battle over this as there will be some clear legal framework to do the distribution.

There has been a fair bit of negative comments made against Administrators in general (myself included).

However if you look at the Sonray case which happened in June 2010 where the clients were told they would get 25-30 cents in the dollar (CEO went to jail) are now according to news reports going to receive 69 cents. A lot of the credit must go to the Administrator who managed to get some of the parties to provide funds to pay the clients in return for not taking legal action. The Administrator in this case did not eat into the "Client segregated funds" as there would be nothing left by now.

Thanks Hatton

I think as in the Sonray case it will be long fight, but hopfully the combination of legal action and neg publicity pressure saxo to make a significant payment. Hopefully the same will happen with MF global counterparties.

Out of interest do we have or adminsttraors any vaild claims from? National Guarantee Fund see link

http://www.segc.com.au/claim.html

 

[mmis4168]

Thanks Hatton

I think as in the Sonray case it will be long fight, but hopfully the combination of legal action and neg publicity pressure saxo to make a significant payment. Hopefully the same will happen with MF global counterparties.

Out of interest do we have or adminsttraors any vaild claims from? National Guarantee Fund see link

http://www.segc.com.au/claim.html

its a joke

The NGF does not provide protection in relation to futures. The ASX Supplemental Compensation Fund covers claims in relation to money or property entrusted to a participant of ASX in respect of actual or proposed dealings in futures.

and

ASX Supplemental Compensation Fund
1. Claims in respect of the fraudulent misuse or defalcation of money or property by a single Market Participant will be limited to $1,000,000;

2. Any series of Claims arising out of the same set of circumstances will be limited to $1,000,000;

3. the maximum amount payable to any one claimant arising out of a single set of circumstances will be limited to $100,000. In this regard a Claim will be considered to arise out of the same circumstances if it arises out of property having been given or entrusted to a single Market Participant.; and

4. Claims will be pro-rata where the Fund is insufficient to meet all claims.

 

[Nick29]

This is ironic given MFG UK is disputing Australian held cash:

http://www.ft.com/cms/s/0/6b0bbe94-2d76-11e1-b985-00144feabdc0.html#axzz1hPVXCH76

 

[riskapur]

This is one of the reasons we probably won't get all our money back - because of the shortfall in the MFG US accounts and the unlikely ability to collect what MFGA is owed by MFG US.

http://www.zerohedge.com/news/guest-post-run-global-banking-system-how-close-are-we

Basically it comes down to state sponsored theft sanctioned by the US Government and Regulatory Bodies.

The investigators and regulators know where the money went - to JP Morgan coffers sanctioned by CME.

Undoubtedly JPM have enough evidence to suggest that CME knew about MFG client money being stolen well before collapse on 1 November. So JPM have CME over a barrel and that is why JPM get to keep the margin calls made with MFG Client money and neither CME or US government officials can do anything about this. They can't tell the public the truth regarding the complicit and corrupt nature of the CME and regulators (SEC and CFTC) for fear of a run being made on the whole system.

That is why you get ridiculous decisions made by CME and the Trustee regarding bankruptcy proceedings in relation to MFG being made in accordance with that of an equities firm insolvency instead of commodities brokerage insolvency (as it should have been) allowing JPM to get all their money back first ahead of client account holders.

Suggest take all of your trading money out of any jurisdiction that does not have an investor protection scheme. Might be a good idea to take your money out of JPM as well

 

[Pager]

Thankfully although I had an account with MFG it had very little in it as I only left it open when I changed Broker last year but thought it prudent to leave the account open to save all the hassle of account opening if I needed to use them again.

My sympathy’s to those who look like they will at best lose a good chunk of there account to this scandalous event.

Quite how and why this was allowed to happen in this day and age with all the regulatory bodies in various countries there to so call protect us from the rogues is beyond me, and also highlights how the senior executives at these firms can get away with robbery and win or lose these parasites still get paid, Corzine came out and said he would not seek a severance package for stepping down from MFG, what a joke and the fact he was entitled to one just highlights that these people cant lose, if your average worker f@cks up and is sacked then unless there is just cause they get f@ck all, but a big boss or senior exec automatically gets a $$$$$$$$$$$ payout, then you have the likes of JPM who will gladly take the bailout package from the US taxpayer to save them from the mess they were part of creating but as soon as there is the sniff of a decent profit and fat bonuses for the bosses to screw as much blood out of MFG there like a dog with a bone.

Something very very wrong in our society IMO with the way our financial institutions are allowed to operate and reward themselves at the expense of the rest of us and as for the Regulatory bodies, well there a complete joke.

I also wonder what would have happened if MFG,s big punt on Italian Bonds or whatever it was had come off ?, well there would have been plenty of back slapping and mega bonuses for the boys but what would the clients whose money was used in the segregated accounts have gotten from it ?????, well Nothing, zilch, naff, f@ck all, they would have been completely unaware they were the ones taking the risk but had absolutely nothing to gain, a win win situation for the executives, although Corzine didn’t take a severance package I would bet the other senior executive bastards did and are more than likely already employed in similar roles at other institutions.

Very very sad

 

[hatton01]

Pager, I agree with you that it does not seem fair that Jon Corzine "is still a free man" while all of us will have to take haircut's on our accounts.

Fortunately for this "scumbag" he lives in country where you are innocent until proven guilty.

With nine lawsuits, several class actions & ongoing investigations I think Jon Corzine is living on borrowed time. Recently Raj Rajaratnam got 11 years jail time for insider trading. The prosecuters were after a 25 year sentence.

Where will Jon Corzine come unstuck "Falsly stating the second qtr results in Oct" ("when MF Global Holdings Ltd.’s management sent a memo to the securities firm’s 2,800 employees: Start printing on both sides of paper in Sep") or as it is alleged by the CME group "he knew about the transfer of client seg funds".

I know if he does not spend some time in jail, the probabilities are very high that the various civil class actions must surely bankrupt him ?

 

[westie]

This is interesting, sustained client pressure in the UK appears to have forced the local administrator KPMG to implement an early partial distribution. According to this article possibly this month:

http://www.reuters.com/article/2012...20120105?feedType=RSS&feedName=topNews&rpc=71

 

[Trader101]

This is interesting, sustained client pressure in the UK appears to have forced the local administrator KPMG to implement an early partial distribution. According to this article possibly this month:

http://www.reuters.com/article/2012...20120105?feedType=RSS&feedName=topNews&rpc=71

I haven't seen any updated from our administrator for 3 weeks, I thought they were suppose to finalise the distribution method after the creditors meeting on 22nd of Dec. I tried to call yesterday but no once answered - not sure if they are still working on the case.

 

[Trader101]

I haven't seen any updated from our administrator for 3 weeks, I thought they were suppose to finalise the distribution method after the creditors meeting on 22nd of Dec. I tried to call yesterday but no once answered - not sure if they are still working on the case.

Might be a good idea to go down to the office and see whats going on if you are in sydney

 

[westie]

Given the date of the last CoC meeting I wasn't hopeful of a response before the Christmas break, but likewise I am now beginning to get anxious for an update.

A sceptic could perceive Delloite's timing and delay in response as being deliberate in maximising the turn around and ultimately a distribution using the Christmas break to their advantage.

I would hope to have an update on Monday.

 

[hatton01]

Looks like the office was closed for the Xmas break.

No timeframe for the release of the CC meeting details from the person I spoke to.

Have provided some details of this "Nightmare" to a staffer who contacted me from Senator John William's office who wanted more details.

For those who dont know the Senator has been very active in creating laws to cleanup the insolvency business. Not that I am implying anything here with our Admin Delloite's who seem to be doing everything so far according to the book. Unfortunately everything seems to happen at a a very slooooooow pace. After paying a million dollars I would hope the turnaround would be a lot quicker.

 

[Trader101]

Looks like the office was closed for the Xmas break.

No timeframe for the release of the CC meeting details from the person I spoke to.

Have provided some details of this "Nightmare" to a staffer who contacted me from Senator John William's office who wanted more details.

For those who dont know the Senator has been very active in creating laws to cleanup the insolvency business. Not that I am implying anything here with our Admin Delloite's who seem to be doing everything so far according to the book. Unfortunately everything seems to happen at a a very slooooooow pace. After paying a million dollars I would hope the turnaround would be a lot quicker.

Dear Hatton

I don't know if Admin Delloite's are working very efficiently, if we compare to UK and HK it seem they are a lot slower. Also according to their web site Delloite's Australia was closed for 3 weeks between 24/12/2011 and 08/01/2012. this I think is joke and a insult to all the client who needs these funds to make a living. Do Delloite's not realise that this is one the biggest bankruptcy case in Australia and that thousands of people are waiting for them to resolve the issue?

 

[traderchris]

Agree with you we have heard nothing they should at least keep everyone posted , the longer they leave this the more desperate people will become

 

[Trader101]

Agree with you we have heard nothing they should at least keep everyone posted , the longer they leave this the more desperate people will become

If someone from Delloite's are reading this, can they explain the following:
1/ Why is the administration taking so much longer then Hong Kong and the UK administrators?
2/ Why are they not answering client questions directly and hiding behind a wall of MF global staff who are shielding them from the difficult questions?
3/ Why are they taking 3 weeks break from the administration process when there is supposedly so much work to be done in calculating client balance, formalising distribution methods and chasing funds from counterparties? How can they justify this, when so many clients depend on these funds to make a living? How come KMPG UK was proving clients with update during this time?
4/ Why are the administrators not being transparent over the amount of fees they are charging for the administrations. Are they charging any fees for the 3 week that their office was closed?
5/ What actions is Delloite’s undertaking to get the remaining balance from DBAL other than ‘having meeting,’ why are they not taking legal action or going to the media about these issues?
Not trying to have a go at you Delloite's but we all just want some answers

 

[traderchris]

How many MFGA clients are there in Australia that have had their funds confiscated , surely this is illegal ? Found these articles

Attorney: MF Global Clients Can File Arbitration to Obtain Lost Money
http://www.lawyersandsettlements.co...terview-mf-global-bankruptcy-diane-17283.html

http://www.indextrader.com.au/Email_9_20111128_Deloitte_Dragging_Their_Feet.pdf