Bloomberg News

MF Global U.K. to Start Returning Funds as Soon as Next Week

February 03, 2012

(Updates with client assets comments from fifth paragraph.)

Feb. 3 (Bloomberg) -- MF Global Holding Ltd.’s U.K. administrators told a London judge they plan to start returning money to the failed broker’s clients as early as next week.

The interim distribution would be made “only to agreed claims” from customers with protected accounts, Martin Pascoe, a lawyer for the administrators, said at a court hearing today.

KPMG LLP, which was appointed to wind up the broker’s U.K. unit, yesterday said it planned to make the first payment to clients who had money locked in customer accounts. The interim distribution will return 26 cents for every dollar claimed.

MF Global became the fifth-largest financial firm to file for bankruptcy when it sought protection on Oct. 31 after making a $6.3 billion bet on European sovereign debt. More than $1 billion was frozen in the U.K. unit’s protected customer accounts along with client assets, such as shares and other securities, worth about $100 million.

The return of client assets is made more difficult by the fact that MF Global treated the funds as its own rather than recognizing them as belonging to customers, KPMG said. The “vast majority” of assets held for customers “became the company’s property,” Pascoe told Judge David Richards.

KPMG is unable to return more than 26 percent of client funds because of a pending Supreme Court case that will determine which customers can claim protection, and a dispute with the bankruptcy trustee in New York over about $740 million held in the U.K. for American customers.

MF Global Inc.’s U.S. trustee, James Giddens, has threatened to sue for the money.

“Like the Trustee, we wouldn’t rule out litigation,” Pascoe said.

--Editors: Anthony Aarons, Christopher Scinta

To contact the reporter on this story: Kit Chellel in London at cchellel@bloomberg.net

To contact the editor responsible for this story: Christopher Scinta at cscinta@bloomberg.net


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