Sat, Dec 3, 2016
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Opalesque Futures Intelligence

The Untold Story: Serious Issues With Chairman Gensler's Role in MF Global's Demise
Not only has this chairman governed during the most damaging event in regulated derivatives market history, did inaction at key points assist in the destruction?

Wednesday, November 14, 2012

Serious Issues With Chairman Gensler's Role in MF Global's Demise

By Mark Melin

CFTC Chairman Gary Gensler has thusfar refused independent questioning from those with intimate knowledge of the MF Global affair. Serious questions exist regarding Mr. Gensler's oversight not only as the commodity markets suffered their worst set back in history, but his potential role in assisting in this process.

Did MF Global's Sovereign Debt Positions Vaporize During the Sale?

A serious question that should be asked of Mr. Gensler involves the foreign sovereign debt positions held by MF Global. Did MF Global have the sovereign debt positions on their books during the sale process, or were those positions removed from the books? If removed, why did those positions not get packaged in the original sale of the broker? The buyers were said to be interested. Shouldn't the CFTC Chairman do everything possible to help facilitate the sale of MF Global?
Additional questions center on the Chairman's activities over the Halloween weekend.

During an event with profound impact on market integrity, normal protocol would be for Chairman Gensler to consult domain experts and career staff regarding the implications of a bankruptcy decision. The Chairman's actions did not to follow anticipated protocol and resulted in decisions being made regarding abdicating responsibility of the bankruptcy process. An investigation into CFTC procedures would document that actions that impact the stability or integrity of markets are typically considered in conjunction with staff. At a minimum, Chairman Gensler could have reached out to the domain regulators and career staff to mention what was about to occur regarding the bankruptcy process.

Questions that might be asked of Mr. Gensler include: "When control of the bankruptcy process was succeeded to the SEC in the early morning meeting of October 31, 2011, why didn't you consult career staff or fellow regulators? The bankruptcy process could have waited several hours, at a minimum. The event had historic impact on commodity market integrity, your sworn duty to uphold. At a minimum this is neglect or more seriously a breach of fiduciary responsibility.

During the period of time Chairman Gensler managed the MF Global process, until November 3, 2011, serious questions were raised. MF Global had violated segregation levels in July, 2011 and the manipulation of disclosure documents to the Securities and Exchange Commission (SEC) over the summer of 2011 obfuscated critical risk disclosure in MF Global's bond offering. A CFTC Commissioner called for an investigation into this behavior, but his calls went ignored by officials.
The question for Chairman Gensler: What was the conflict of interest you cite as your reason for a partial recusal from the MF Global affair? When calls from a CFTC commissioner identified potential fraudulent behavior in a document scandal, was this considered a red flag scratching the surface of numerous fraud suspicions?

What to Expect from the Congressional Report on MF Global


On Thursday, November 15 at 10:30 AM the Congressional report on MF Global is set to be released.

The report is not expected to provide any clarity towards criminality, as Congress is unlikely to interfere with an ongoing investigation. The report will likely focus on MF Global risk management, lack of controls and document "chaos" and "confusion" in the bankruptcy process has been widely reported. The report will engage in a review of regulatory discussions and provide a review of certain regulatory expectations. A review of both CFTC and CMEGroup performance may be included, but the report won't address what should or should not have been done. It is unknown the extent to which the actions of November 1, 2011 will be addressed in the report.

Overall the report's tone is anticipated to be similar to the bankruptcy trustee's report in that it will document facts, identifying potential areas of concern. Unfortunately, some areas of concern could be addressed using nuanced statements and references. Don't expect the report to provide any clear smoking guns - particularly as it relates to the guilt of Jon Corzine, MF Global's acknowledged leader.



 
This article was published in Opalesque Futures Intelligence.
Opalesque Futures Intelligence
Opalesque Futures Intelligence
Opalesque Futures Intelligence
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. M&A - AllianzGI to acquire Sound Harbor Partners, SS&C completes acquisition of Wells Fargo's Global Fund Services business[more]

    AllianzGI to acquire Sound Harbor Partners Allianz Global Investors (AllianzGI), an active investment manager, announced that Sound Harbor Partners, a US private credit manager led by Michael Zupon and Dean Criares, have agreed to join its fast-growing Private Debt Platform. Under the te

  2. Europe - UK investors to pay more tax on money in offshore funds, Do you want to hand your money to super-algo or a Swiss banker?[more]

    UK investors to pay more tax on money in offshore funds From FT.com: Hedge funds in Dublin and Luxembourg are set to be hit by new rules that will force UK investors to pay more tax on the money they hold in offshore funds. As part of the government’s Autumn Statement on the country’s fi

  3. Hunt for yield pushes more investors into riskier assets[more]

    From FT.com: Pension funds and insurance companies have increasingly embraced riskier assets in their hunt for higher returns over the past five years. Alternative assets such as property, infrastructure, private equity and hedge funds have been bought up by institutional investors in a world where

  4. People - Nectar Financial hires senior investment team, Texas A&M replaces retiring foundation investment chief, Ex-Cadwalader partner Woolery makes another sudden exit, How to become a Python coder at a top hedge fund, by the co-CTO of Man AHL[more]

    Nectar Financial hires senior investment team Nectar Financial AG, a Swiss financial technology company for wealth and asset management, has announced that it has hired two key senior leaders to spearhead its digital asset management efforts. The company also announced that it has entere

  5. Activist News - Cognizant has introductory discussion with activist investor Elliott; to review letter, Starboard Value makes huge investment in Hewlett Packard, Hedge fund calls for removal of First NBC Bank CEO[more]

    Cognizant has introductory discussion with activist investor Elliott; to review letter From Indiatimes.com: Cognizant said it had an introductory discussion with Elliott Management after receiving the activist hedge fund's letter asking for a board shakeup, a buyback, a dividend and chan