Peter1469
08-12-2012, 07:56 AM
Link (http://www.reuters.com/article/2012/08/10/us-sentinel-appeals-decision-idUSBRE87900T20120810)
In a case surrounding the MF Global collapse, a federal appeals court upholds a lower court ruling for a bank that MF Global paid off with customer money holding that the bank was a higher "class" creditor than the account holders.
So let's get this straight: I deposit my money into Bank A. Bank A is suppose to keep customer accounts separate from its operating accounts. But Bank A uses my money to pay a debt it owes to Bank B- in violation of law, and the money now belongs to Bank B? A financial system cannot operate that way. It looks like just another way to make sure the Bankers get paid off at our expense.
However, Thursday's ruling suggests that brokerages can use customer funds to pay off other creditors, Sentinel trustee Fred Grede told Reuters.
"I don't think that's what the Commodity Futures Trading Commission had in mind" with its requirement that brokers keep customer money separate from their own, he said.
"It does not bode well for the protection of customer funds."
Worse, Grede said, is that the ruling suggests that a brokerage that allows customer money to be mixed with its own is not necessarily committing fraud.
That may raise the bar for proving that MF Global Holdings Ltd, under then-CEO Jon Corzine, misused customer funds as it scrambled to meet margin calls to back bets on European debt in the brokerage's final days. A $1.6 billion customer shortfall remains.
In a case surrounding the MF Global collapse, a federal appeals court upholds a lower court ruling for a bank that MF Global paid off with customer money holding that the bank was a higher "class" creditor than the account holders.
So let's get this straight: I deposit my money into Bank A. Bank A is suppose to keep customer accounts separate from its operating accounts. But Bank A uses my money to pay a debt it owes to Bank B- in violation of law, and the money now belongs to Bank B? A financial system cannot operate that way. It looks like just another way to make sure the Bankers get paid off at our expense.
However, Thursday's ruling suggests that brokerages can use customer funds to pay off other creditors, Sentinel trustee Fred Grede told Reuters.
"I don't think that's what the Commodity Futures Trading Commission had in mind" with its requirement that brokers keep customer money separate from their own, he said.
"It does not bode well for the protection of customer funds."
Worse, Grede said, is that the ruling suggests that a brokerage that allows customer money to be mixed with its own is not necessarily committing fraud.
That may raise the bar for proving that MF Global Holdings Ltd, under then-CEO Jon Corzine, misused customer funds as it scrambled to meet margin calls to back bets on European debt in the brokerage's final days. A $1.6 billion customer shortfall remains.