Bloomberg News

MF Global Regulatory Probe Includes Review of CME Audit

January 09, 2012

(Adds CME Group spokeswoman comments in fourth paragraph.)

Jan. 6 (Bloomberg) -- The U.S. Commodity Futures Trading Commission is reviewing actions by CME Group Inc., the world’s largest futures exchange, as part of its investigation into the bankruptcy of MF Global Holdings Ltd, according to a person briefed on the probe.

The CFTC is reviewing CME Group’s audit of MF Global prior to the collapse of the New York-based broker, during which as much as $1.2 billion in client funds went missing. The CFTC, Securities and Exchange Commission, Justice Department and bankruptcy trustee overseeing the MF Global liquidation are investigating the possible misuse of client funds.

The CFTC’s five commissioners haven’t voted to begin a formal investigation into CME Group, according to the person briefed on the matter, who requested anonymity because the investigation is private. CME Group was MF Global’s primary auditor.

“We haven’t been notified that we’re under investigation,” Anita Liskey, a CME Group spokeswoman, said today in an interview. “We would expect it and we welcome it,” she said of the CFTC review. “That is their job to investigate MF Global and all that’s happened, and we’re a part of that.”

The brokerage reported to CME Group more than $200 million in excess customer funds as of Oct. 28 with no indication then that protected money had gone missing, she said. CFTC has also assigned the CME Group to do 33 “limited reviews” of other futures brokers to ensure segregated accounts are accounted for, Liskey said. So far, 31 of the reviews have been completed and the last two are expected to be finished “very soon,” she said.

MF Global used about $700 million of customer funds to “meet liquidity issues” at its broker-dealer in the days prior to the bankruptcy, according to CME Group. MF Global filed the eighth-largest U.S. bankruptcy on Oct. 31. The New York Times reported earlier on the review of CME.

--With assistance from Matthew Leising in New York. Editors: Maura Reynolds, John Parry, Mitchell Martin

To contact the reporter on this story: Silla Brush in Washington at sbrush@bloomberg.net.

To contact the editor responsible for this story: Lawrence Roberts at lroberts13@bloomberg.net


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