UPDATE 2-MF Global in $90 million accord over rogue trader

Thu Aug 11, 2011 7:47pm EDT

* Rogue trader caused $141.5 mln loss

* IPO documents said to mislead about MF risk management (Adds details from settlement, background)

NEW YORK Aug 11 (Reuters) - MF Global Holdings Ltd MF.N, its former parent and more than three dozen underwriters agreed to pay $90 million to settle a lawsuit by investors who claimed they were misled about risk management at the brokerage, which surfaced when a rogue broker caused a big trading loss.

The settlement agreement covers investors from July 2007 to February 2008 and was made public in a filing on Thursday with the U.S. District Court in Manhattan. It requires court approval. An agreement in principle had been reached in January.

Investors led by four pension funds sued after MF Global revealed on Feb. 28, 2008 that the broker's trades resulted in a $141.5 million loss on wheat futures in roughly six to seven hours, which the commodities and derivatives brokerage would have to absorb.

The investors said this disclosure revealed flaws in MF Global's risk management system that should have been made clear the previous July, when Britain's Man Group Plc (EMG.L) spun off MF Global in a $2.92 billion initial public offering.

Following the disclosure, MF Global shares plunged 40 percent over two days, wiping out more than $1.1 billion of market value, the investors said.

MF Global is based in New York and has been led since March 2010 by Jon Corzine, a former New Jersey governor and chief of Goldman Sachs Group Inc (GS.N).

A spokeswoman said MF Global will contribute $2.5 million toward the settlement and that there will be no material impact on the company from the payment.

Lead plaintiffs are the Iowa Public Employees' Retirement System; the Policemen's Annuity & Benefit Fund of Chicago; the Illinois-based Central States, Southeast and Southwest Areas Pension Fund, and the State-Boston Retirement System.

The case is Rubin v. MF Global Ltd et al, U.S. District Court, Southern District of New York, No. 08-02233. (Reporting by Jonathan Stempel; editing by Andre Grenon)

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