Galen Stops looks at how segregation of funds is under the spotlight once more and the paths the industry could take to restore confidence.
As the burst of shocking revelations about Peregrine
Financial Group’s misappropriation of client money
slow to a steady drip of press releases from the US legal and
regulatory bodies, the key question now is how the second of
two major fraud cases in less than nine months may affect the
structure of the futures industry.
With the PFG case coming so close on the heels of the MF
Global debacle last year, the industry needs to act fast to
restore customer confidence in segregated funds and restore the
sanctity of customer protection to the industry.
As CFTC Commissioner Gary Gensler said last week "the system
failed to protect the customers of Peregrine."
New rules for FCMs
Unsurprisingly, structural changes are being called for from
many corners of the industry. The response from the CFTC has
been to fast-track the National Futures
Association’s recommendations regarding the
oversight of FCM’s segregated accounts, made in
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