Implications of the recent decision of the High Court in Re Global Trader Europe Limited (In Liquidation) regarding the application of the FSA’s client money rules.
The US Commodity Futures Trading Commission’s years-long litigation against the former CEO of MF Global Holdings Ltd. has concluded with a settlement. After the brokerage firm MF Global went bankrupt in a 2011 liquidity crisis, the CFTC sued CEO Jon Corzine for dipping into nearly $1 billion of segregated client funds in an effort to obtain badly needed liquidity. The settlement requires Corzine to pay a $5 million fine out of his own pocket, rather than from insurance.
On February 8th, the CFTC published for comment proposed regulations that would set forth parameters for the inclusion of an orderly liquidation termination provision in the swap trading relationship documentation for swap dealers and major swap participants. Comments should be submitted on or before April 11, 2011. 76 FR 6708.
A recent bankruptcy court decision in the Southern District of New York may raise concern among brokerage firms who execute and clear brokerage transactions for hedge funds and similar investment vehicles. The bankruptcy trustee of the Manhattan Investment Fund (which the court found to be a Ponzi scheme and whose principal Michael Berger pled guilty to criminal charges) obtained summary judgment against Bear Stearns requiring it to return to the bankruptcy estate all the margin payments the fund had made in the year before it imploded, totaling $141.4 million.
The collapse of Lehman Brothers was a major test of the procedures developed by market participants to address counterparty credit risk and has uncovered deficiencies in risk management policies and their application.
The collapse of Lehman Brothers was a major test of the procedures developed by market participants to address counterparty credit risk and has uncovered deficiencies in risk management policies and their application.
Implications of the recent decision of the High Court in Re Global Trader Europe Limited (In Liquidation) regarding the application of the FSA’s client money rules.