Let's look at Dodd-Frank language and see if it protects MF customers.
We've been discussing the MF Global bankruptcy for months now, and it seems we continue to see the same issues. Unlike Chase Bank or Morgan Stanley, the government does not see the need to 'broadcast' it's regulatory involvement in the recovery of over $1 billion in missing MF Global money.
In a different approach, I've researched the Dodd-Frank bill to see if the language supports federal intervention on behalf of MF Global customers.
Just in case we don't know what a "customer" is, Dodd-Frank tells us:
"DEFINITIONS RELATING TO COVERED BROKERS AND
DEALERS.—The terms ‘‘customer’’, ‘‘customer name securities’’,
‘‘customer property’’, and ‘‘net equity’’ in the context of a covered
broker or dealer, have the same meanings as in section 16
of the Securities Investor Protection Act of 1970 (15 U.S.C.
I wonder if a customer, by not receiving their money, has had their rights violated?
(d) ACTIONS BY CORPORATION AS RECEIVER.—
(1) IN GENERAL.—Notwithstanding any other provision of
this title, no action taken by the Corporation as receiver with
respect to a covered broker or dealer shall—
(A) adversely affect the rights of a customer to customer
property or customer name securities;
Does Dodd-Frank cover the specific requirement of returning money to customers? Apparently, that law has been on the books since at least 1970?
(2) SATISFACTION OF CLAIMS BY SIPC.—SIPC, as trustee
for a covered broker or dealer, shall satisfy customer claims
in the manner and amount provided under the Securities
Investor Protection Act of 1970 (15 U.S.C. 78aaa et seq.), as
if the appointment of the Corporation as receiver had not
occurred, and with a filing date as of the date on which the
Corporation is appointed as receiver. The Corporation shall
satisfy customer claims, to the extent that a customer would
have received more securities or cash with respect to the allocation
of customer property had the covered financial company
been subject to a proceeding under the Securities Investor
Protection Act (15 U.S.C. 78aaa et seq.) without the appointment
of the Corporation as receiver, and with a filing date
as of the date on which the Corporation is appointed as receiver.
Just to clarify further:
"CUSTOMER PROPERTY.—As trustee for a covered broker
or dealer, SIPC shall allocate customer property and deliver
customer name securities in accordance with section 8(c) of
the Securities Investor Protection Act of 1970"
Each of these excerpts were found by searching 'customer' in the Dodd-Frank pdf, which returned over 800 results. In searching 'missing funds' or 'missing,' I found very limited language that discussed the notification of 'missing holders of securities.' There's no indication if customer cash is included in that language.
In searching 'negligence,' I found this little gem:
(f) LIABILITY OF DIRECTORS AND OFFICERS.—
(1) IN GENERAL.—A director or officer of a covered financial
company may be held personally liable for monetary damages
in any civil action described in paragraph (2) by, on behalf
of, or at the request or direction of the Corporation, which
action is prosecuted wholly or partially for the benefit of the
(A) acting as receiver for such covered financial company;
(B) acting based upon a suit, claim, or cause of action
purchased from, assigned by, or otherwise conveyed by
the Corporation as receiver; or
(C) acting based upon a suit, claim, or cause of action
purchased from, assigned by, or otherwise conveyed in
whole or in part by a covered financial company or its
affiliate in connection with assistance provided under this
(2) ACTIONS COVERED.—Paragraph (1) shall apply with
respect to actions for gross negligence, including any similar
conduct or conduct that demonstrates a greater disregard of
a duty of care (than gross negligence) including intentional
tortious conduct, as such terms are defined and determined
under applicable State law.
(3) SAVINGS CLAUSE.—Nothing in this subsection shall
impair or affect any right of the Corporation under other
(g) DAMAGES.—In any proceeding related to any claim against
a director, officer, employee, agent, attorney, accountant, or
appraiser of a covered financial company, or any other party
employed by or providing services to a covered financial company,
recoverable damages determined to result from the improvident
or otherwise improper use or investment of any assets of the covered
financial company shall include principal losses and appropriate
With the Trustees findings of growing negligence, this should be an open and door case, unless that is, you're an Obama campaign contributor and friend!
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