Anxious wait for MF Global clients
Australian clients of failed broker MF Global face a nervous wait to learn the fate of their investments.
Australian clients of failed broker MF Global face a nervous wait to learn the fate of their investments. AUSTRALIAN clients of failed broker MF Global face a nervous wait to learn the fate of their investments with the company, which called in administrators yesterday after its US parent declared bankruptcy.Fallout from the collapse has also hit three of Australia's big banks, which had deals linking their clients to the group over contracts for difference, or CFDs - bets on the size and direction of movements in share or commodity prices.MF Global's implosion also forced the Australian Stock Exchange to suspend trade yesterday on two small commodity futures markets, in grain and wool, that the company dominated.A deal to sell the entire group, run by former Goldman Sachs executive Jon Corzine, collapsed late on Sunday, New York time, when it was discovered that up to $US700 million ($A660 million) in client funds might be missing.The administrator of MF Global's Australian arm, Chris Campbell of Deloitte, said there was no evidence that any local client funds were missing.''At the moment, I haven't heard or seen anything to do with that,'' he said.He said he was not yet able to say how many customers the company had or how much of their money it held.The Australian group had two main arms, one of which sold over-the-counter CFDs to retail customers while the other was a futures dealer with mainly institutional clients, he said.As of March 31, when MF Global ruled off its most recent set of books, the company held more than $160 million in client funds and had a trading book in excess of $400 million.''Somebody might have multiple accounts and also a lot of positions were closed out over the past few days, so I just don't know how many live accounts are left,'' Mr Campbell said.''There's something like 80 bank accounts that we've identified at the moment across pretty much all the banks in Australia,'' he said.''We're just working through making sure all those accounts are frozen - there are funds in them and there are some substantial funds in them.''Mr Campbell's task is made more complicated because he has yet to gain control of additional ''substantial funds'' held in clearing accounts by MF Global's trading partners, including Deutsche Bank.Tens of millions of dollars more are caught up in transactions between MF Global's Australian arm and other members of the group's sprawling global network of companies.MF Global's collapse left CFD clients confused and unable to withdraw funds from their accounts with the company, which they were told were frozen in an email from the company on Monday night.''Yesterday they were allowing trading but I couldn't get the money out,'' one client, who said he had thousands of dollars trapped in an account with MF Global, told BusinessDay.Mr Campbell plans to close out client accounts, and said he hoped to start sending notices to clients advising of their positions yesterday. A meeting of creditors could be held as early as next Friday, he said.Mr Campbell said an investigation team would start looking at the company's history ''shortly''.He said a $4 million dividend MF Global paid to its US parent in late June would be reviewed. The payment was disclosed in the company's latest annual report, which also discloses that its directors expected retail revenue to slump 65 per cent and ''professional customer relationship revenues'' to fall 60 per cent in the coming financial year.Commonwealth Bank subsidiary Commsec has suspended the sale of over-the-counter contracts for difference that were hedged through a wholesale deal with MF Global. A bank spokesman said it would close out open CFD positions ''in an orderly manner'' and ''can commit to the return of any funds owing to clients in a timely manner''.However, CBA warned it might take weeks to close positions in stocks in which there was little trade.ANZ and Westpac both had relationships with MF Global in which their clients used the broker to trade contracts for difference, although both said only a small number of their customers were affected.All three banks said their financial exposure to MF Global was either ''very small'' or ''not material'', as did NAB.