Senator John Hoeven yesterday issued the following statement in response to testimony at the U.S. Senate Agriculture, Nutrition and Forestry Committee hearing on MF Global, a brokerage firm that declared bankruptcy in October. Bankruptcy trustees currently estimate the company has a shortfall of $1.2 billion in customer accounts.
“Clearly, MF Global needs to be held accountable for any customer segregated funds that were lost when the company declared bankruptcy this fall. So far, about 72 percent of customer assets have been recovered. The Department of Justice is investigating to determine whether accounting errors were made or unauthorized transfers were made from customer accounts to the company’s accounts.
“We need to do all we can to see that 100 percent of those customer accounts are restored. We also need to get to the bottom of what happened and why, make sure there is proper accountability, and also determine what may need to be changed to see that this doesn’t happen again. Farmers, ranchers and small businesses need to be able to use the commodity markets with confidence.”
“The leadership of MF Global owe its former customers an explanation as to why their funds were lost when the brokerage firm collapsed. Those people deserve answers. And I am disappointed by the lack of information provided to date by any of the decision makers at MF Global.
“It shocks me to learn that a company like MF Global could use the so-called ‘repo-to-maturity’ technique to hide massive purchases of European sovereign debt. The company was able to count these bonds as ‘sold’ even though the bonds were used as collateral, and left MF Global highly vulnerable to the losses that eventually resulted from the European debt crisis.
“Clearly everything that can be done, must be done to return missing funds to affected investors and the leadership of MF Global must be held to account for their reckless behavior.”
In letters to Gary Gensler, the Chairman of the Commodity Futures Trading Commission (CFTC), and Mary Schapiro, Chairman of the Securities and Exchange Commission, Senator Conrad questioned a legal loophole that allowed MF Global to engage in practices that bankrupted the company, and likely resulted in substantial losses and uncertainty for thousands of its customers, including a number of North Dakotans.
In response, in part, to questions posed by Senator Conrad to Chairman Gensler in a December 1 hearing the CFTC voted 5-0 on December 5 to limit the types of investments that futures merchants can make with its clients’ money. In particular, the CFTC will no longer allow these merchants to invest their clients’ money in foreign sovereign debtand also bans in-house transactions and “repo” agreements with their affiliates.
Source: Offices of Senator Hoeven & Senator Conrad