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The Wall Street Journal has obtained new documents and e-mails that show how bad MF Global was at keeping track of their money and why. Regulators, says the report, had been trying to fix this problem months before the firm went down. Probably not a good sign for a brokerage.
Check out the response authorities got when they asked how much cash the firm had left (from the WSJ):
“This will require a significant effort,” the MF Global accountant, Matthew Hughey, wrote in an email to seven colleagues at 4:24 a.m. on Oct. 27, 2011. A copy of the email was reviewed by The Wall Street Journal.
You’ll remember that no criminal charges have been filed in this case, despite the disappearance of over a $1 billion in customer funds. In the next few weeks a Congressional report about MF Global will be released, and a private lawsuit filed against the company is expected to be updated with information about poor management at the firm.
These management issues were “chronic and deeper than previously disclosed” says the Journal. Think: Mid-level and back office employees with leeway to move millions of dollars around.
An April 2011 spreadsheet called “Outgoing Wire Approved Individuals” lists nearly three dozen back-office employees with authority to move money, sometimes with no limit on the size of the transfer as long as a higher-ranking official approved…
The spreadsheet also shows that MF Global set no “dollar threshold” on how much employees could move from accounts used to invest the firm’s own money and certain customer funds. In contrast, only two employees were allowed to move more than $500,000 at a time out of an account used to pay commissions owed by MF Global. It isn’t clear if the same procedures were in place when MF Global collapsed.
There’s evidence to suggest that MF Global’s management concerns were focused elsewhere in the business. Primarily with a technological overhaul after a rogue trading issue in 2008. This after having “skeletal” risk management resources to begin with.
Former New Jersey governor and MF Global CEO Jon Corzine couldn’t be reached for comment.