Commodity Futures Trading Commission Finalizes Rule To Protect Customer Funds
The Commodity Futures Trading Commission (CFTC) unanimously approved on Monday tighter limits on how brokerage firms can use customer funds.
The measure was finalized in a 5-0 vote. The rule was initially proposed by the CFTC in October 2010, but stalled after a lack of support from other commissioners, reports Reuters.
The now-bankrupt MF Global, along with other firms, had previously encouraged the U.S. futures regulator to delay the measure.
They argued that any changes would hurt their customers and firms, depriving them of a key source of income, namely interest revenue on customer accounts.
MF Global filed for bankruptcy on October 31 after investors became repelled by its large bets on European sovereign debt, Reuters reports.
The firm is now being investigated for potentially raiding customer funds for its own use. Hundreds of millions of dollars in customer money is still unaccounted for.
The rule prevents brokerage firms, known as futures commission merchants, from conducting "in-house" repurchase transactions.
It also restricts firms from investing customer money in foreign sovereign debt, thus preventing a possible breach of client funds, reports Reuters.
It is not clear whether the rule would have been able to prevent MF Global from misappropriating as much as $1.2 billion in customer money.