Andrew Harrer/Bloomberg NewsJill Sommers will lead the Commodity Futures Trading Commission’s inquiry of MF Global.
8:01 p.m. | Updated
Federal regulators have ordered an audit of every American futures trading firm to verify that customer money is protected, a move that comes after roughly $600 million in client funds were discovered to be missing from MF Global, the bankrupt brokerage firm once run by Jon S. Corzine.
The Commodity Futures Trading Commission, the federal regulator searching for the missing money at MF Global, will audit many of the nation’s largest futures commission merchants, according to a person briefed on the decision. Exchanges like the CME Group will examine smaller firms to ensure they are keeping customer money separate from company money, a fundamental rule on Wall Street.
The futures commission also announced on Thursday that it had formally opened an investigation into MF Global, a largely symbolic move that indicated the seriousness of the case. The agency has already issued subpoenas to MF Global and its auditor, PricewaterhouseCoopers, but the commission had to vote before announcing a full-scale investigation.
“The commission has determined it is in the public interest to confirm the existence of this particular investigation,” the agency said in a statement.
Gary Gensler, the commission’s chairman, abstained from voting after recusing himself from the investigation because of questions about his past association with Mr. Corzine. While the two were not close in recent years, Mr. Gensler worked for Mr. Corzine at Goldman Sachs in the 1990s. And Mr. Gensler supported Mr. Corzine’s campaign as a Democratic candidate for governor of New Jersey, with a $10,000 check.
With Mr. Gensler out, a Republican member of the agency, Jill E. Sommers, will serve as the senior commissioner on the case, the agency said in the statement.
“Segregation of customer funds is at the core of customer protection in the commodity futures and options markets and must be maintained at all times,” Ms. Sommers said in the statement. “I have complete confidence in the dedicated men and women in enforcement to carry out the necessary investigation to get to the bottom of what happened.”
The commission and other federal regulators are continuing to search for the $600 million missing from MF Global. The Federal Bureau of Investigation is also examining the case.
Mr. Corzine and MF Global have not been accused of any wrongdoing.
The futures industry has boomed in recent years, growing to more than 100 futures commission merchants in the United States. Most of the largest Wall Street banks, including Goldman Sachs and JPMorgan Chase, have a futures business, as do many boutique banks and brokerage firms.
The regulator’s decision to audit every futures firm is aimed at restoring calm to an anxious industry, and perhaps some faith. MF Global’s downfall, and the revelation of missing customer money, has raised questions about the safety of the futures business.
MF Global’s customers, including farmers and traders, were frozen out of trading by the CME Group on the day MF Global filed for Chapter 11. The IntercontinentalExchange, in a letter on Thursday to the federal bankruptcy judge overseeing the case, asked that it be allowed to release some customer money that it still holds. Still, many customers are angry at CME, the exchange where MF Global did most of its business, for not detecting the missing money sooner.
The last large-scale audit that the CME Group conducted at MF Global was in January. It also did a “spot audit” on Oct. 26 to verify that customer money was in the right accounts at outside banks, said a person close to CME who spoke on condition of anonymity because the investigation was continuing. MF Global filed for bankruptcy on Oct. 31.
On Nov. 2, the exchange said MF Global might have transferred client money “in a manner that may have been designed to avoid detection,” a serious violation of Wall Street regulations.
Michael J. de la Merced contributed reporting.
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