In the aftermath of the MF Global bankruptcy, the National Grain and Feed Association said that returning 100% of customer-segregated funds and other property to their rightful owners should be the top priority of lawmakers, regulators, commodity exchanges and the trustee.
In testimony before the House Agriculture Committee, the NGFA said there continue to be uncertainties and complexities associated with recouping customer-segregated funds and other property, such as warehouse receipts and shipping certificates, tied up in the bankruptcy. While former customers of MF Global currently have access to their hedging accounts, the NGFA noted that only about 60% of their initial margin funds that were linked to those transferred futures market positions have been returned thus far.
“Ultimately, the number one immediate goal of the NGFA is to advocate for the return of funds and property to customers as quickly as possible,” said John Fletcher, general manager of Central Missouri Agri-Service LLC. “At the end of this process, customers must be made whole. Any other outcome will result in a damaging loss of confidence in our risk-management system” among agricultural producers and agribusinesses.
In its testimony, the NGFA also urged lawmakers and federal agencies to review the protections that were believed to be in place for customer-segregated funds, up to $1.2 billion of which were found to be missing following the MF Global Inc. bankruptcy. The MF Global bankruptcy has been a “shock to the industry,” the NGFA said, and represents a major challenge to restoring confidence in the future use of exchange-traded risk-management tools.
MF Global filed for bankruptcy protection on October 31.