The joint special administrators of MF Global UK have today provided an update to clients on a number of current issues at www.kpmg.co.uk/mfglobaluk.
Mike Pink, joint special administrator of MF Global UK at KPMG, said: "There is substantial activity in progress, in numerous work streams, on the MF Global UK special administration. Nearly 80% of client statements have now been issued. Indeed we have issued more client statements (approximately 5,200) than we have received claims (approximately 4,700).
“The involvement of the court is likely to be required to decide various contentious issues thrown up by the case. MF Global Inc’s $700m claim against MF Global UK’s segregated pot, which we dispute, is now set to be decided in court. Following the Supreme Court judgment on Lehman, it is also likely that we will need further court guidance on tracing assets and monies and adding them to the segregated pool. This could involve a forensic review of MF Global UK’s 250 non-segregated accounts. As this issue affects both Lehman and MF Global UK we will liaise with the Lehman administrators, with the aim of mitigating the costs of this exercise and to maximise efficiency across both cases.”
A selection of updates is as follows (the fuller document is available online):
- Customer statements: the special administrators have produced statements for around 5,200 customers, which represents approximately 79% of customers. Where statements have not been issued yet, this is a consequence of delays in waiting for information from third parties or where the statements need to be produced for a number of dates. The delayed statements largely relate to:
- Customers who traded positions on the London Metal Exchange;
- Customers who traded positions primarily on US exchanges;
- Customers who had balances transferred by exchanges at what appear to be rates other than the prevailing market rates at the date of transfer.
- Segregated accounts: distinguishing segregation is one of the most time-consuming issues on the case ie where a claimant has submitted a claim on the basis they were classified as a segregated client whereas MF Global UK’s systems classified them as a non-segregated client as at 31 October 2011. Approximately 1,200 claims (over 25% of total claims) have been received to date. Key issues include:
- Incorrect classification of clients as non-retail clients;
- Efforts to change the classification of a customer’s account from non-segregated to segregated in the days immediately prior to the special administration;
- Assets passed to the firm under Absolute Title Transfer.
- Claims between MF Global UK and MF Global Inc: the special administrators have been engaged in active discussions since November 2011 with the SIPA Trustee over his claim for the return of some $700m. The dispute centres around whether the amounts posted should be treated as segregated or non-segregated balances. It has been mutually agreed that this dispute should ultimately be determined by the English Courts.
The special administrators continue to pursue the recovery of approximately $400m of MF Global UK segregated client assets and monies and house assets and monies held by MF Global Inc.
- Tracing of client monies and client assets: the rules for tracing have not been tested in the context of the special administration rules and could potentially involve a major forensic exercise given that MF Global UK operated approximately 250 non-segregated bank accounts. This issue may require a further application to court for final resolution.
- Financial Services Compensation Scheme: to date, the special administrators have provided a list of approximately 1,500 agreed claim balances to the FSCS so they can make payments.
- Asset distribution plan: following the passing of the asset claim bar date on 29th February 2012, the special administrators are working on a distribution plan in accordance with their statutory responsibilities. A draft should be available for the next creditors’ committee meeting in early May 2012. The plan will then be subject to court approval.
- Debt trading: MF Global UK has started to process the first transfers of claims from claims trading operations. There has been a noticeable increase in this activity over the past few weeks.
For further information please contact:
Notes to Editors:
Richard Fleming, Richard Heis and Mike Pink of KPMG LLP were appointed joint special administrators of MF Global UK Limited, a UK based broker-dealer business, and MF Global UK Services Limited, which provides employee and pension services in relation to the UK operations, at 5pm on Monday 31st October 2011. MF Global UK Limited is a wholly owned subsidiary of MF Global Europe Limited which in turn is a subsidiary of MF Global Holdings Limited, a company incorporated in Delaware, USA, which filed for chapter 11 bankruptcy protection on 31st October.
The objectives of the administration are:
- To ensure the return of client assets as soon as is reasonably practicable;
- To ensure the timely engagement with market infrastructure bodies and the Authorities pursuant to regulation 13; and
- To either rescue the Investment Bank as a going concern or wind it up in the best interests of creditors.
KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and operates from 22 offices across the UK with over 11,000 partners and staff. The UK firm recorded a turnover of £1.7 billion in the year ended September 2011. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. We operate in 152 countries and have 145,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. KPMG International provides no client services