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Chilton pushes for futures insurance fund after MF Global reaches settlement agreement

Bart Chilton

Bart Chilton

Trustees representing MF Global’s failed brokerage division and holding company agreed to settle claims late last month with the firm’s London arm, and between $500 million to $600 million will be returned to the brokerage division.

James W. Giddens and Louis J. Freeh, trustees overseeing MF Global’s wind-down, originally sought to take back $700 million from the London unit. The brokerage division set to receive the settlement funds is currently paying back customers, DealBook reports.

“These agreements are in the best interests of former customers and other creditors and allow us to request court approval for significant additional distributions for securities and commodities customers,” Giddens said, according to DealBook. “Resolving complex issues with these entities marks a critical milestone in administering the MF Global Inc. estate.”

Giddens, who said that he planned to make additional payment distributions to customers, and Freeh also agreed to settle disputes between the two entities regarding funds used to pay out claims. MF Global’s brokerage division represents customers while the holding company is responsible for paying off creditors.

MF Global is charged with using customer funds, which were held by small clients, including farmers and ranchers, to cover the firm’s expenses. Regulatory and federal authorities have been investigating the firm’s collapse, DealBook reports.

Commissioner of the CFTC Bart Chilton said that he was pleased with the settlement but added that a futures insurance fund would prevent future losses to customers.

“The Futures Insurance and Customer Protection Act that I have proposed Congress consider would offer assurances for futures customers who get fleeced when an MF Global-like failure or a Peregrine Financial Group-like fraud takes place,” Chilton said. “There are solid models for such a fund in the securities and banking worlds. Why not futures?”

Chilton said that such a fund would be attainable with “minimal staff and a minimal budget.”

“It’s a small price to pay to protect honest investors who stand the chance of getting ripped off by the unseemly dealings of a few bad actors,” Chilton said.

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