Even after more than three months of investigations by the FBI and federal prosecutors it is uncertain if any criminal charges will be filed. The hunt to find out if officials deliberately took customer money to avoid the collapse is continuing, but according to those familiar with the investigation the trail is growing cold.
If prosecutors decide not to file criminal charges, there is still always the possibility of civil enforcement action by the U.S. Commodity Futures Trading Commission and the U.S. Securities and Exchange Commission, where the burden of proof is different. The CFTC and the SEC declined to comment on civil action. One regulator with knowledge of the MF Global investigations said "it's just too preliminary" to determine the likelihood of a criminal case.
Judge examining ex-executives insurance
U.S. Bankruptcy Judge Martin Glenn who is overseeing the MF Global bankruptcy will review an estimated $190 million of insurance for former executives of MF Global and determine if it should instead go to customers. Several opponents have raised objections to that money going to those people they hold responsible for the collapse. Glenn directed that more information from various parties be submitted to him by March 21.
"Many of the issues that the objectors have raised require greater scrutiny," Glenn at a recent hearing. "Hopefully you can resolve those ... that would permit payment of those amounts. If you can't, you can't."
Frank speaks out on fault for bankruptcy
Representative Barney Frank, D-Mass., is arguing that the collapse of MF Global wasn't a sign that the Dodd-Frank legislation failed to comprehensively regulate deriviatives.
“That was not a case of derivatives escaping scrutiny,” said Frank, who crafted the law that now bears his name. “The derivatives themselves were covered by the bill. Under the bill, they had to get post margins for these [trades].” It’s true that regulations forced MF Global to comply with capital requirements that limited leverage on the risky bets they made on sovereign debt in troubled European countries. When MF Global failed to post enough capital to back up those futures contracts, regulators insisted that they do so. But at that point, MF Global was already in a downward spiral and reportedly resorted to using at least some of the customer funds to prop up the firm’s daily activities, though it’s still unclear whether the money was directly used to back up its bad European bets."
S&P cuts CME Group rating
On Wednesday Standard and Poor's lowered the rating of the CME Group as a result of the damage caused by the collapse of MF Global. The impact of MF Global's failure shook confidence in the futures markets and has CME facing legal, regulatory and reputational damage. S&P lowered the credit rating for CME from AA to AA-, but says that the bankruptcy could lead to another drop.
"We could lower the rating on CME Group if legal and reputational issues take a long-term toll on its franchise and financial positions," S&P said.