Legal authorities in the United States have agreed to a settlement with failed brokerage firm, MF Global, details issued by the US Federal Court of Manhattan outlining the case. Plaintiffs are expected to receive $21 million in claims against the broker. The demise of MF Global added salt to the wounds of the global financial system after the disappointment of the 2008 recession which saw the evaporation of the Lehman Brothers.
Complaints were raised against MF Global, a former trader at the firm and a hedge fund. Court papers stated that the plaintiffs filed wrongdoings against the firm and the individuals for buying and selling the precious metals between June 2006 and April 2010 in the derivatives market, as well as the physical market. The trader was noted as Joseph Welsh and the hedge fund was Moore Capital Management.
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MF Global’s case highlights the importance of oversight and monitoring of firms by regulatory bodies, authorities in developed markets such as the UK and US opt for firms to have a self-regulatory approach, however a number of firms have fallen through the net which have impacted retail and private investors. Notably, PFG Best and WorldSpreads, both were involved in high level cases of fraud and manipulation.
The post 2008 recession has brought a number of regulatory reforms on a regional and global scale, in the US, the Dodd-Frank Act has altered the operating landscape for a number of firms in various sectors. The OTC derivatives broking environment is facing extinction as authorities have made it difficult for firms to maintain capital requirements. In Europe, the recent implementation of EMIR reporting has caused chaos for brokers and banks as the organisation provided limited instructions on how firms should report data in a uniform manner.
The damaged financial trading environment will seek refuge from the latest settlement report, investors have been cautious in investing in financial markets as the global arena is scarred by issues.