Submitted by EconomicPolicyJournal.com
We do not want to diminish the hard work of the Commission and the staff, to meet or exceed the Commission’s goals in many other areas. However, the Commission cannot afford to ignore mission-critical responsibilities either. The Commission originally voted to establish these goals and to make every effort to achieve them. Therefore, the Commission must use this report to review its shortcomings and make adjustments to both its budget and surveillance priorities to ensure that critical futures market oversight is not neglected. Failure to make these adjustments expose futures markets to both systemic and operational risk and could cost customers hundreds of millions of dollars. MF Global provides a startling wake up call for the Commission to review its existing rules and regulations for flaws and to ensure that the Commission’s current obsession with the Dodd-Frank rules do not compromise its existing mission.
We are deeply troubled by media reports that you are considering seeking permission of the court to pay enormous bonuses to top executives of the now-bankrupt MF Global Holdings. It is difficult to understand why you would even consider paying anyone a bonus while nearly $1.6 billion in customer money is still missing. And it is absolutely outrageous to propose paying bonuses to the very people who were responsible for the firm’s operational, legal, and financial management at the time customer money disappeared.
3. MFGI’s commodities customers seek in other courts to recover the full balance of the damages to which the law entitles them (i.e., out-of-pocket loss plus other tort damages) from non-debtor persons whose acts and omissions caused MFGI’s breach of its duty to maintain fund segregation. The non-debtors whom the MFGI commodities customers sued consist of former directors and officers and others (Jon Corzine, et al.). If the Chapter 11 Trustee and MFGA were to have their way, these liability policies’ proceeds would not be used to pay down a portion of MFGI’s existing liability to its commodities customers for their out-of-pocket loss. Instead, the policies’ proceeds would be diverted from the injured persons whose claims the policies cover and who have vested rights to the proceeds protected by N.Y. Ins. Law § 3420(a)(1), and instead used by Corzine, et al. to defend against actions by MFGI’s commodities customers. Because defense costs erode the policies’ limits, this would also waste MFGI’s estate property and would unlawfully subordinate the rights of MFGI’s commodities customers in order to favor Corzine, et al. The Chapter 11 Trustee’s and MFGA’s positions are outrageous, unjust, inequitable, legally untenable and absurd.
The Trustee is a fiduciary and has the duty to do this as promptly as possible. For unfathomable reasons, the Trustee has not collected the policy proceeds. Instead, the Trustee is passively acquiescing in efforts being made to devest MFGI’s commodities customers of the policies’ proceeds and to divert them to pay Corzine, et al.’s defense costs in actions brought against them in other courts by MFGI’s commodities customers trying to recover the entire loss to which tort law entitles them.