By Lene Powell, J.D., Commodity Futures Law Reporter.
The National Futures Association (NFA), the self-regulatory organization for the U.S. futures industry, has proposed several measures to tighten control over customer segregated funds held by commodity futures brokers, known as futures commission merchants (FCMs). Most significantly, the rule would require written approval by the CEO or CFO of withdrawals of more than 25% of the FCM's “residual interest” in customer segregated funds.
The proposed measure is popularly referred to as the “Corzine Rule” after the former CEO of MF Global, a major FCM that suddenly went bankrupt last fall. In the days leading up to the firm’s failure, funds were transferred from customer segregated funds to cover the firm’s proprietary trades. Jon Corzine has stated that he was not aware of the fund transfers.
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