Last week after a year-long investigation, a report by a subcommittee of the House Financial Services Committee?investigation led by Representative?Randy Neugebauer?of Texas, released its 101-page findings from its October 2011 fall of MF Global.
Considered the eighth largest bankruptcy in U.S. history, a $1.6 billion MF Global customer fund short fall that should have been segregated, ultimately led to the company’s demise. Former CEO Jon Corzine has said to lawmakers that he doesn’t know what happened with the money.?
The report had a number of findings which included that?U.S. regulators did not coordinate oversight of the firm.
It said the following via Compliance Week, “Both agencies focused on their respective jurisdictional interests and not the firm as whole. There is no record of meaningful communication between the SEC and the CFTC until the week before the company’s bankruptcy. When these regulators finally tried to coordinate, it was disorganized and haphazard.?
It also determined that?CEO Jon Corzine took large risks without regard to the good of MF Global, specifically citing a $6.3 billion bet against European debt.
In addition, even without approval from his colleagues and warnings, Corzine still made the bet. For those who not agree with him, they found themselves replaced with former colleagues from Corzine’s Goldman Sachs days.
Here’s more details from the report via Bloomberg.
A marriage between the CFTC and SEC?
In the MF Global report, which noted that aforementioned lack of communication and working together of the two regulatory agencies, it included possible merging of the two.
The report said via Compliance Week, “The MF Global case alone does not necessitate the merger of the SEC and the CFTC, however the evidence found in the MF Global case is symptomatic of regulatory inefficiencies. As financial products, markets, and market participants have converged, the SEC’s and the CFTC’s regulatory jurisdictions have increasingly overlapped. It only makes sense to collapse these entities and create a regulatory framework that brings us into the 21st century.”
The calls to merge aren’t anything new. This has been going on since former?Treasury Secretary Henry Paulson during President George W. Bush’s administration supported a plan.?
A merger had also been considered, but later omitted, in the writing of Dodd-Frank.?
Just last month, SEC Chairman Mary Schapiro questioned whether there could be a joint regulator some day.?
She said via Politico, “My view is there is an enormous amount of logic to combining the two agencies, and I think as well as we work together, having to divide the over the counter derivatives market” regulations “is an example of why combining the two agencies would make sense.”?
CFTC Chairman Gary Gensler would not comment on it.