Financial Regulatory Forum

By Emmanuel Olaoye and Christopher Elias

NEW YORK/LONDON, Dec. 21 (Thomson Reuters Accelus) - The bankruptcy trustee for collapsed U.S. brokerage firm MF Global Inc. is looking into how the firm re-pledged customer collateral as part of its search for $1.2 billion of missing customer funds.

The practice, called re-hypothecation, has drawn renewed scrutiny after the failure of MF Global and experts said U.S. regulators may face new restrictions as part of efforts to increase protection on customer accounts. (more…)

By Christopher Elias

NEW YORK, Nov.16 (Business Law Currents) - Off balance sheet items and undisclosed liabilities are coming back to bite companies, as repo-to-maturity disclosures prove to be a jarring reminder of pre-crisis risk proclivity.

Symptomatic of a wider problem gripping U.S. banks, MF Global’s bankruptcy has drawn attention to the danger of financial services firms hiding their true liabilities, no matter how safe they think they are.

The revelation that MF Global’s off balance sheet leveraged repo-to-maturity play was stuffed full of toxic Eurozone debt proved to be its downfall. The prospect of a Eurozone default spooked markets and MF Global’s liquidity drained away. A review of U.S. banks’ SEC disclosures reveals, however, some troubling implications of the gaps in U.S. GAAP filings as the true nature of hidden debt exposure becomes apparent.  (more…)