UPDATE 1-Mizuho settles U.S. charges over fund deficiencies

Thu Jan 3, 2013 12:38pm EST

By Sarah N. Lynch

WASHINGTON Jan 3 (Reuters) - Mizuho Financial Group agreed to pay $175,000 to settle civil charges by U.S. futures regulators in connection with allegations that the bank failed to hold enough funds in its secured accounts to protect clients, the regulators said.

The Commodity Futures Trading Commission said Mizuho Securities USA Inc did not immediately report the deficiency to regulators and failed to properly supervise its employees.

The bank agreed to settle the matter without admitting nor denying the allegations.

A spokesperson for Mizuho could not be immediately reached for a comment.

The CFTC's rules require futures brokerages to keep enough funds in separate secured accounts to help cover the obligations of its customers.

The CFTC stepped up its enforcement of rules protecting customer funds over the past year after an estimated $1.6 billion of customer funds went missing amid the collpse of MF Global in 2011 under the weight of aggressive bets on sovereign debts.

The alleged deficiencies of Mizuho's secured accounts occurred in October 2011, just weeks before MF Global's spectacular downfall.

The CFTC said Mizuho had a $12.4 million shortfall of secured funds on Oct. 7, 2011, and another shortfall of about $41 million on Oct. 10.

Daily accounting reports did not properly reflect the deficiencies, the CFTC said. After the bank discovered the problem on Oct. 11, it did not notify the CFTC until the following day.

The CFTC said Mizuho did not have "proper policies and procedures" in place to ensure that funds were transferred to the correct accounts.

"Mizuho also failed to provide its employees with training regarding their obligation to immediately notify the Commission of any secured fund deficiency," the CFTC added.

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