The MF Global Collapse Was Messier Than You Probably Thought

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Jon Corzine, the former head of now-defunct brokerage firm MF Global, has provided few details as to how exactly the company plunged so quickly into bankruptcy even as it unlawfully dipped into customer funds. It's OK though. Newly-released emails and phone transcripts from the final days of the firm’s existence do a fine job of telling the story.

The 47-page report released last week by the Commodity Futures Trading Commission as part of its civil suit against Corzine details several major lapses in judgment that combined to rip a hole big enough to sink MF Global in a matter of days.

In the fall of 2010, roughly a year before MF Global threw in the white flag, the firm’s chief risk officer voiced his concern over Corzine’s extremely risky bets on European sovereign bonds, telling Corzine and the board that the positions could “result in margin calls and more demands for cash, would be difficult to unwind, and posed a liquidity risk to the firm.” Corzine didn’t change his behavior. He changed the chief risk officer, who left the firm the following March.

Then, in October of 2011, facing serious liquidity concerns, MF Global chose not to access a $1.2 billion revolving line of credit with J.P. Morgan Chase, fearing it may give the “appearance that the firm needed to borrow money and therefore was in financial trouble,” according to the complaint. Around that time, the firm’s global treasury, reportedly nicknamed by Corzine as “The Gravedigger,” told the Chief Financial Officer and another colleague that the firm must “tell [Corzine] that enough is enough. We need to take the keys away from him.” They didn’t.

Finally, at the end of October, MF Global sank itself. It reportedly took $500 million from customer funds and dumped it into its own proprietary accounts. “It is a total clusterf***,” assistant treasurer Edith O’Brien, who has also been charged in a civil suit, told a colleague. Indeed it was. Creditors became suspicious that money being paid to them didn’t comply with CFTC regulations. J.P. Morgan, fearing the obvious, asked MF Global for written assurances that transfers were within the law. The letter made its way around MF Global. No one ever signed it.

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List of the Day: Working with Recruiters

Financial services recruiters can be a great resource, but if you don’t pick the right ones or fail to work with them strategically, you’ll struggle. Here are three key tips.

  1. Work with just two or three.
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  3. Remember to reciprocate.

(Source: eFinancialCareers)

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