August 30, 2012
There's Enough Legislation to Put Jon Corzine in Jail For A Long Time!
We break down each piece of legislation and specific text of interest in the Jon Corzine/MF Global investigation.
In a previous article, we made the case against Jon Corzine with only the Dodd-Frank bill. Since the Department of "Just Us" has decided not to pursue criminal charges against Corzine, we've decided to expand our research to Sarbanes-Oxley and the Commodities Exchange Act.
From the Commodities Exchange Act of 1936:
"It shall be unlawful for any futures commission merchant
to, directly or indirectly, extend or maintain credit to or
for, or collect margin from any customer on any security futures
product unless such activities comply with the regulations
prescribed pursuant to section 7(c)(2)(B) of the Securities Exchange
Act of 1934."
"(b) PURPOSE.—It is the purpose of this Act to serve the public
interests described in subsection (a) through a system of effective
self-regulation of trading facilities, clearing systems, market participants
and market professionals under the oversight of the Commission.
To foster these public interests, it is further the purpose of
this Act to deter and prevent price manipulation or any other disruptions
to market integrity; to ensure the financial integrity of all
transactions subject to this Act and the avoidance of systemic risk;
to protect all market participants from fraudulent or other abusive
sales practices and misuses of customer assets; and to promote responsible
innovation and fair competition among boards of trade,
other markets and market participants."
"such person shall, if a futures commission merchant,
whether a member or nonmember of a contract market or derivatives
transaction execution facility, treat and deal with all
money, securities, and property received by such person to margin,
guarantee, or secure the trades or contracts of any customer
of such person, or accruing to such customer as the result
of such trades or contracts, as belonging to such customer.
Such money, securities, and property shall be separately accounted
for and shall not be commingled with the funds of such
commission merchant or be used to margin or guarantee the
trades or contracts, or to secure or extend the credit, of any
customer or person other than the one for whom the same are
Let's move on to Sarbanes-Oxley:
I believe that SOX ties up all federal legislation of the protection of customer funds by compelling officers to sign financial returns and disclose that they are not aware of any internal controls issues.
"(5) the signing officers have disclosed to the issuer’s auditors
and the audit committee of the board of directors (or
persons fulfilling the equivalent function)—
(A) all significant deficiencies in the design or operation
of internal controls which could adversely affect the issuer’s
ability to record, process, summarize, and report financial
data and have identified for the issuer’s auditors any material
weaknesses in internal controls; and
(B) any fraud, whether or not material, that involves
management or other employees who have a significant
role in the issuer’s internal controls"
Why do we have tens of thousands of pages of legislation that supposedly protect customers if we can't:
1) Recover missing funds in a timely manner?
2) Criminally prosecute those directly responsible for the misuse of such funds?
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