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Rudolph, WI | Here is an email from my broker on Nov 4. Have not heard anything since. I have been with this broker for 10 years and they have done very well for me, but not sure I want to put new money into a new account, until I am assured that others are not allowed to steal my money at will without consequence. Plus, news today says the missing money may be twice as much, $1.2 billion instead of $600 million, it keeps getting messier.
Dear valued customer,
It’s highly likely that by now you have heard of the declared bankruptcy of our clearing firm, MF Global. In an unprecedented move, it also appears they may have dipped into customer deposits (which by law are to be segregated), adding further complexity to the situation. The good news is that we believe every penny deposited by our clients will be returned. The bad news is we do not yet know the timeline, but we believe it will be on the shorter side (see news link below). Here are some facts:
- Just 11.3% of total customer deposits were missing. That means, in an absolute worse-case scenario, a client could potentially lose 11.3% of the funds they deposited. Not good, but not a disaster. However, we have just read that the missing funds were found in a custodial account at J.P. Morgan Chase & Co. This should expedite the return of these assets to their rightful owners.
http://www.bloomberg.com/news/2011-11-04/mf-s-missing-client-funds-...
- Just as bank accounts are insured by the FDIC up to $250,000, brokerage accounts are insured by the SIPC (Securities Investor Protection Corporation) for up to $500,000 in losses.
For these reasons, we are confident that every penny in your accounts will be accounted for; it’s just a matter of timing.
We at **********. have been working hard all week to ensure we can run business “as usual” as quickly as possible. We have signed an agreement with a new clearing firm, ********, and all of our customer accounts will be bulk transferred to them over the weekend. However, because there is still the complicating issue of the missing customer deposits
- Those accounts with active hedge positions will be moved to ****** with the positions remaining intact. However, only the margin held by the CME will move along with the account. This means that come Monday, many of you will have substantial margin calls on existing positions. It appears the regulatory authorities may also allow for “extra” grace time in fulfilling these margin calls.
- Those accounts with positive cash balances and no current positions will have their account numbers moved to *****, but no cash will move along with them. Instead, MF Global will cut a check and send it to you via U.S. mail. You will then be able to fund your new account at ****** (if you so choose) with these funds.
What is still unknown is
- For those accounts with cash balances and no current positions, what level of initial return will they receive.
- Timing. No one knows how long it will take to make everyone “whole”.
We are optimistic that all client funds, every last penny, will be returned sooner rather than later.
- In bankruptcies of brokerages, clients are given a higher priority than all other creditors.
- The SIPC insures your accounts to losses up to $500,000
- The missing funds have been found (see above)
- For over 100 years the confidence in the futures market has hinged on the security of segregated funds. The industry knows this and can’t afford to let things drag on for too long, in our opinion.
In the meantime, please don’t hesitate to contact us if you have any other questions or concerns. We apologize for the inconvenience and uncertainty this has caused many of you.
Best regards,
Edited to remove names
Edited by ncwi4450 11/21/2011 14:40
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My broker's response concerning MF Global
