We use cookies to provide you with a better experience. If you continue to use this site, we'll assume you're happy with this. Alternatively, click here to find out how to manage these cookies

hide cookie message
RSS FeedRisk

FSA to consider brokerage rule changes


MF Global collapse highlights lax rules surrounding client funds

Article comments

The Financial Services Authority is considering changing the rules around how brokers handle client funds following administrators KPMG’s problems in recovering client assets from MF Global.

FSA spokesman Chris Hamilton said the regulator will consider changing the rules around holding cash in non-segregated accounts after KPMG threatened lawsuits against some firms holding MF Global client assets. The FSA stepped in to talk to these firms to break the impasse.

MF Global filed for administration following a £4 billion failed bet on European sovereign debt. The broker’s clients are struggling to get their money back on accounts where their investments have been pooled. KPMG has recovered $1 billion of the $1.2 billion worth of client assets, but has been unable to locate the remaining $200 million.

Brokerages like MF Global hold investments on behalf of pension funds or hedge funds. Problems arise when the broker goes bust because those assets are frozen and they are most likely invested elsewhere, which means they are sitting on someone else's books such as a bank or exchange.

KPMG has successfully reclaimed the assets and cash held by clients in segregated accounts, where there is demonstrable link between the asset and its owner.

But cash held in non-segregated accounts is proving harder to recall because the firms holding the funds are often also owed money and are wary of giving up what they have for fear they may not get what they are owed in the long run.

KPMG declined to comment on the possibility of rule changes but Chris Hamilton, a spokesman for the FSA, said they would be considered.

"Lessons from the MF Global UK administration process will be factored into the review of the effectiveness of the HM Treasury Special Administration Regime legislation (as required in the Banking Act 2009), scheduled for early 2013," he said.

Share:

Comments

FSA to consider brokerage rule changes
Risk

Hidden risks in the supply chain

Hidden risks in the supply chain

An unforeseen disaster can halt production and lead to share price falls and reputational damagemore ..


Taylor Wimpey CFO warns against UK withdrawal of EU

The group FD said "barriers would go up" and that would have an impact on Taylor Wimpeymore ..

RBS fined for IT failures after £25m trading losses

Hong Kong regulator fines bank £450,000more ..

Bank of England plans new round of cyber tests for banks

The Bank is to focus on individual banks’ security systemsmore ..

Energy risk: How data is eating up all the energy

Any failure in energy supplies to data servers can result in severe consequencesmore ..

Why BYOD needs to be on every CFO’s agenda

The Software Alliance explains why BYOD can be a legal nightmare for businessesmore ..

Send to a friend

Email this article to a friend or colleague:


PLEASE NOTE: Your name is used only to let the recipient know who sent the story, and in case of transmission error. Both your name and the recipient's name and address will not be used for any other purpose.



In Depth
Do you have what it takes to become a non-executive?

Do you have what it takes to become a non-executive?

The benefits of board service for CFOs more ..

In Depth
How M&A teams can create value by challenging the CEO

How M&A teams can create value by challenging the CEO

A typical “hold” period of nine to 18 months can generate increased sale value more ..

Advertisement

* *