CMC Recap of House Ag Hearing on MF Global

Last week, CMC participated in the House Agriculture Committee hearing on the bankruptcy of MF Global.  It was an important opportunity that positioned the Council as a thought leader on the issue.  We were one of only two witnesses that spoke about the bankruptcy from a market participant perspective.  The hearing garnered significant media attention as it was the first public appearance of former MF Global CEO Jon Corzine since the bankruptcy of the firm.


  • CMC testified at the first Congressional hearing on the MF Global bankruptcy
  • The Trustee currently estimates the customer shortfall to be $1.2 billion
  • Investigations into missing customer segregated funds continue and include CFTC (civil penalties) and the US Attorney’s office (criminal penalties)
  • If in a legal proceeding the CFTC successfully collects restitution from MF Global, it would be distributed to customers.
  • Corzine testified for the first time and will subsequently testify in two more hearings this month (12/13 and 12/15)
  • Congress understands the magnitude of this situation and will explore policy options.  While nothing appears to be imminent, bills have already been introduced and Ranking Member Peterson may introduce a bill requiring third party segregation of customer funds.

The hearing stretched well over 8 hours and started with three hours of tough questioning for CFTC Commissioner Jill Sommers and Mr. James Kobak (lead counsel for the Trustee).

Mr. Kobak estimates the potential shortfall of customer funds at $1.2 billion.  He also indicated that customers would have priority in any asset distribution and the Trustee will pursue any legal theory to “claw back” customer money.  He also explained that today the trustee is asking the bankruptcy court to allow distribution of an additional $2 billion.  If the distribution is granted, it would bring everyone up to 69-70% and customers should have their money in 2-4 weeks.

When Mr. Corzine came forward in the afternoon he proved to be contrarian.  He apologized and took questions.  However, the critical questions – what did he know and when – remain unanswered.

CMC joined several other witnesses on the third panel.  Gerry Corcoran, our witness, gave an abbreviated statement and fielded questions.  Rep. Conaway spoke directly to Mr. Corcoran and asked if it was possible for the market to fix itself after all the dust settled.  Mr. Corcoran suggested that customers are already looking more closely at their FCMs and greater transparency may help customers choose the right FCM.

House Ag Committee Chairman Lucas (R-OK) refrained from advocating for any particular policy change and focused on fact-finding.  Ranking Member Collin Peterson (D-MN), however, took a different approach.  He appears to be giving deep consideration to two options:

  1. The capital requirements of a combined FCM/BD; and
  2. Third party holder of segregated funds or full physical segregation.

Peterson made clear he opposed any proposal for a SIPC-like insurance fund.


Panel I

Panel II

Panel III


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