FINRA: MF Global was not candid with regulators

WASHINGTON (Reuters) - MF Global was not fully candid with U.S. brokerage regulators in 2010 when the firm was asked about its exposure to European sovereign debt, a top regulator said on Thursday.

Steve Luparello, vice chairman of the Financial Industry Regulatory Authority, said in prepared testimony before the House Agriculture Committee on Thursday that FINRA had reached out to MF Global, but the firm indicated in late September 2010 that it "did not have any such positions" in European sovereign debt.

"We later learned that the firm began entering into transactions that carried European debt exposure in mid-September 2010," he said. "While the firm's response was consistent with GAAP accounting rules that repo-to-maturity (RTM) transactions are treated as a sale for accounting purposes, the lack of a complete response delayed us in detecting the firm's exposure."

Market fears over MF Global's exposure to European sovereign debt contributed to its demise in late October this year. It filed for bankruptcy on October 31 after a sudden discovery that hundreds of millions of dollars in customer funds were missing. FINRA was the first of MF Global's several regulators to spot problems at the firm in late May of this year.

(Reporting by Sarah N. Lynch in Washington; Editing by Lisa Von Ahn)