Never again, they said, after $1.6 billion of customer money “vaporized” at MF Global. But now there’s been another big fraud against customers in the futures industry. This time the CEO of PFGBest – and Best Direct Securities as its SEC registrant is known according to Audit Analytics – has admitted in a note accompanying his failed suicide attempt to falsifying books and records for more than twenty years. More than $200 million of customer funds are likely gone for good. Read more in Forbes here. [...]
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When the House of Representatives takes up an appropriations bill this summer that includes funding for the SEC, at least one lawmaker almost certainly will bring up the $65 billion Bernard Madoff fraud case to justify denying the agency the funding that it seeks. That would rekindle a heated debate over which regulator — the Securities and Exchange Commission or the Financial Industry Regulatory Authority Inc. — is to blame for letting him perpetrate his Ponzi scheme for years. Key Republicans place culpability with the SEC, an argument that rankles investment advisers, who contend that there is plenty of blame to go around and note that Mr. Madoff didn’t register as an investment adviser until 2006. Read Investment News report [...] U.S. Rep. Bill Cassidy wrote Thursday to the chairwoman of the Securities and Exchange Commission asking for the SEC to appeal last week’s federal court ruling that the investors defrauded by Houston financier Robert Allen Stanford are not covered by the Securities Investors Protection Corp. Last week’s ruling was bad news for Stanford investors who lost billions of dollars in Louisiana and across the nation. The decision also represented the first time Securities Investors Protection Corp., or SIPC, had ever refused a request by the SEC to cover individual investors for up to $500,000 of their losse. More in The Advocate [...] A friend recently asked me to vet several financial advisers he was considering to manage his retirement portfolio. As one who hates to see people getting fleeced, I’m cautious of Madoff-like malefactors, the latest of which cropped up in the case of the PFGBest brokerage in Cedar Falls, Iowa. So I curbed his enthusiasm a bit about money managers who had impressed him with their initial pitch. Despite two years under the Dodd-Frank financial reform law, millions of investors are still highly vulnerable when it comes to advisers. Buffeted by relentless lobbying by the financial services industry, the strongest pieces of Dodd-Frank have yet to be implemented. Here are key questions you need to ask a prospective financial adviser before you sign up…More on Reuters [...] It was a triumphant moment in 2009 when a delegation of Iowa lawmakers visited here to tour the gleaming, new headquarters of the Peregrine Financial Group. “This is impressive,” Charles E. Grassley, the Republican senator from Iowa, said, admiring the futures trading firm’s state-of-the-art facility. “This is a company that’s on the top of things.” Today, the only impressive thing about Peregrine is the depth of its problems. After a suicide attempt by its founder on Monday, regulators discovered about $215 million in customer money was missing. The Commodity Futures Trading Commission filed a lawsuit charging fraud. Criminal authorities are investigating. Peregrine has filed for bankruptcy and shut down. More in the New York Times [...] Sen. Jerry Moran said one of the nation’s top financial regulators should resign following another high-profile collapse of a financial firm under his watch. On Thursday, the Kansas Republican called for the resignation of Gary Gensler, head of the Commodity Futures Trading Commission (CFTC), saying the recent collapses of MF Global and Peregrine Financial Group (PFG) had done significant damage to market confidence while putting millions of dollars in customer funds at risk. Read more on The Hill [...] This week we’ve gotten two more reminders that you have to be vigilant about protecting your investments from scammers. An Iowa-based brokerage firm collapsed, possibly taking $220 million in customer funds down with it, while a Georgia banker has been charged with embezzling $17 million. Last year, MF Global stunned the investment world when it apparently used customer funds to cover risky bets that went south. The firm would have been in the spotlight anyway, but the fact that former New Jersey Governor and Goldman Sachs partner Jon Corzine was the CEO who made the bad bet put the company, and Corzine himself, on the political and regulatory hot seat. Read CBS News report here. The bankruptcy of brokerage PFGBest will likely be much different from those of the parent companies of other brokerages, including Lehman Brothers Holdings Inc. and MF Global Holdings Ltd., MFGLQ 0.00% and not just because those firms are so much larger. Peregrine Financial Group Inc., which operates as PFGBest, on Tuesday filed in Chicago for protection under Chapter 7 of the bankruptcy code, meaning the company intends to liquidate immediately. Lehman and MF Global, on the other hand, filed for Chapter 11 protection, which gives a company much more time and control to reorganize or wind down its operations. More in the Wall Street Journal [...] Peregrine Financial Group Inc. futures customers won’t have their losses covered by the Securities Investor Protection Corp. even if they were defrauded, the fund’s chief said. The U.S. Securities Investor Protection Act provisions make customers of a futures commission merchant like Peregrine ineligible for payment, SIPC Chief Executive Officer Stephen P. Harbeck said today in a telephone interview. More on Bloomberg [...] The U.S. Commodity Futures Trading Commission is poised to adopt client-fund safeguards to require more reporting of transfers after the collapse of MF Global Holdings Ltd. (MFGLQ) (MFGLQ) and shortfall claims against Peregrine Financial Group Inc., said two people briefed on the matter. The agency’s five commissioners are voting in private on changes proposed after MF Global’s bankruptcy by the National Futures Association, an industry self-regulator, according to the people who spoke on condition of anonymity yesterday because the rulemaking process isn’t public. The measures would require higher levels of reporting when a broker’s principal approves transfers of customer funds, the people said. Read more in Bloomberg Businessweek [...] |
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