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HFSC report: CFTC, SEC failed to share information on MF Global collapse

Mary Schapiro

A recent report by the House Financial Services Committee’s oversight panel revealed that the Securities and Exchange Commission and Commodity Futures Trading Commission failed to share information related to the collapse of MF Global.

Shortly before the firm’s collapse, regulators at the CFTC instructed MF Global to transfer $220 million to remedy a leak in consumer accounts. MF Global agreed to the CFTC’s demands despite objections from the SEC.

“Without telling us? That is unacceptable,” SEC chairwoman Mary Schapiro said in an email upon learning of the CFTC’s orders, DealBook reports.

Emails between regulators were cited in the 100-page report as revealing regulators’ “disorganized and haphazard” oversight approach.

Republican members of the committee put the blame on former chief executive Jon S. Corzine, also a former senator and governor of New Jersey, saying that Corzine upped a bet on European debt with no regard to the danger such a move posed to clients, according to DealBook.

Additionally, Republicans charged that regulators showed leniency towards Corzine.

“We didn’t need additional regulation,” Rep. Randy Neugebauer (R-Texas), who headed the investigation as chairman of the panel, said, DealBook reports. “We needed regulators actually doing their job.”

The report also suggested that the SEC and CFTC merge into a single agency in order to better serve investors and customers. While legislators have tried to combine the two agencies for decades, their efforts have been met with opposition, particularly from the Senate and House agriculture committees.

Some SEC members and congressional leaders support a merger, though others find the likelihood of such a proposal to be slim unless another financial crisis should occur, according to DealBook.

The report was the result of a yearlong investigation and multiple congressional hearings aimed at detailing the firm’s collapse, taking aim at regulatory agencies for their lack of communication.

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