New York futures broker fined $650,000 for not segregating funds

NEW YORK Tue Dec 4, 2012 3:24am IST

Stocks

   

NEW YORK (Reuters) - A federal court has ordered a futures brokerage run by well-known New York trader Mark Fisher to pay $650,000 for not properly segregating customer funds following a complaint filed by the country's top commodity regulator.

The U.S. Commodity Futures Trading Commission accused Fisher's MBF Clearing Corp in March of holding between $30 million and $90 million of customer funds between September 2008 and March 2010 in an account at a separate financial institution that did not meet the requirements of the Commodity Exchange Act.

The account did not have the "legal obligation to make customer funds available for redemption by the next business day". Nor was the account properly labeled as a "customer segregated account," the CFTC complaint said.

The agency went to federal court for an order requiring MBF Clearing to pay the fine. Once it is paid, the firm will be clear of CFTC charges.

Fisher did not immediately return a message left with his New York office seeking comment.

Futures commission merchants, which hold money and place trades for other firms engaged in energy, metals and agriculture trading, have been under a cloud due to the recent collapse of two major players in the industry.

Both the firms, MF Global MFGLQ.PK and Peregrine Financial Group, were found to have had shortfalls in customer funds that were supposed to be kept separate from their own money, a standard held sacred by commodity market participants.

MF Global, run by Jon Corzine, a former United States senator from New Jersey, declared bankruptcy in October 2011 after making wrong-way bets on European sovereign debt and facing a shortfall of some $1.6 billion in customer money.

In July, Iowa-based Peregrine Financial Group filed for bankruptcy and two months later its chief executive, Russell Wasendorf Sr., pleaded guilty to stealing more than $100 million in customer money.

The industry is attempting to police itself more efficiently. In April, the CME Group (CME.O) set up a $100 million fund to reimburse farmers and ranchers losses due to insolvency "of a clearing member or other market participant," it said in a release.

And in October of this year the CFTC laid out a proposal to add another layer of protection to customer money, which would allow organizations such as the National Futures Association access to brokerages' bank accounts.

(Reporting By Jeanine Prezioso; Editing by Peter Galloway)

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