UPDATE 1-CFTC launches investigation into bankrupt MF Global

Thu Nov 10, 2011 2:44pm EST

* CFTC: Announcing MF Global review "in public interest"
    * Jill Sommers to take lead on MF Global matters for CFTC
    * Regulators still working to find missing customer money

    By Christopher Doering
    WASHINGTON, Nov 10 (Reuters) - The U.S. futures regulator
on Thursday said it has launched a formal investigation into
bankrupt MF Global , increasing pressure on the
brokerage as the search for roughly $600 million in missing
funds continues.
    The announcement by the Commodity Futures Trading
Commission is rare in that the agency typically does not
publicly announce probes it is launching.
     The regulator said its enforcement division began
investigation on Oct. 31, and added announcing the review was
"in the public interest." The agency does not intend to provide
further updates on the review.
     "This isn't just a lost and found inquiry; it's a full-on
effort to get to the bottom of what appears to be a massive
hide-and-seek ploy," Bart Chilton, a Democratic commissioner,
told Reuters.
     The CFTC also said Jill Sommers, a Republican
commissioner, would take the lead on matters related to MF
Global. She replaces Chairman Gary Gensler who has recused
himself from the investigation.
     Sommers said in a statement that separate from the MF
Global probe, the CFTC will review clearing futures commission
merchants to ensure that customers funds are being properly
segregated from firm money, in accordance with the Commodity
Exchange Act and CFTC regulations.
     U.S. regulators are undertaking a sweeping review into the
business practices of MF Global as they search for
roughly $600 million in missing money. The FBI also has shown a
preliminary interest in regulatory probes looking into the
missing funds.
     MF Global's trades on European debt helped trigger its
collapse. The broker's exchange regulator, CME Group Inc , has said MF Global did not properly segregate customer
funds from its own, a violation of futures market brokerage
rules that leaves client funds vulnerable.
     It also has said MF Global appeared to have made
"transfers of customer segregated funds in a manner that may
have been designed to avoid detection."
     Gensler has defended the agency's oversight of MF Global,
telling reporters last week that it has been "very much on the
beat." He pointed out an action the CFTC took against the firm
in December 2009 that resulted in a settlement of $10 million.
     But Gensler has been careful to distance himself from the
current MF Global review. Reuters reported last week he was not
participating in the investigation of MF Global so he would not
become a distraction or risk creating an appearance of a
conflict of interest.
     Gensler and Jon Corzine, who resigned as MF Global's chief
executive last week, worked at Goldman Sachs Group Inc 
at the same time and held prominent positions. They both left
the investment bank in the late 1990's.