A House Financial Services subcommittee has released the results of its investigation into the collapse of MF Global, revealing that a lack of coordination among regulators and decisions by the firm’s CEO contributed to the collapse.
“Despite the promise of Dodd-Frank that regulators would work together, what the…investigation found is there was no meaningful coordination among the regulators who were responsible for the supervision of MF Global,” Spencer Bachus, the chairman of the HFSC, said. “This left each regulator with an incomplete understanding of the company’s financial health—and MF Global’s customers paid the price. This, once again, raises the question of whether regulators are so preoccupied writing hundreds of new rules that they’re missing the basics like safeguarding customer funds and protecting investors from financial frauds.”
Shortly before the collapse of MF Global, regulators at the Commodity Futures Trading Commission instructed the firm to transfer $220 million to fix a hole in consumer accounts. MF Global agreed to the demands despite objections from the Securities and Exchange Commission.
The report also faulted MF Global’s CEO Jon Corzine for the firm’s collapse, saying that Corzine made the decision to turn the firm into an investment bank without a complete understanding of the potential risks associated with the move and that he advocated investment in the sovereign debt of European nations struggling to stay afloat.