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1. DW REPORT: MFG Reserve Fund Could Boost 4d Recovery to 96%

2. MFGI Hearing Update

3. Trustee Issues Report on Status of Investigation

4. Trustee will comply with Form 1099 reporting

5. NFA Releases Guidance for CTA Performance & Disclosures re MFG

6. UPDATE 1/19/12: – CFTC RESPONDS WITH BRIEF

7. CCC Receives Formal Request from Senator Stabenow for Recommendations

8. NIBA Gets Access for IBs to October Commissions

9. Trustee Releases Presentation to MF Customers

10. CCC Files Response Brief in MFGI Bankruptcy

Trustee Releases Estimate of Deficiency & Claims Update

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RELEASE FROM THE MFGI TRUSTEE

UPDATE ON ESTIMATED COMMODITIES DEFICIENCY AND CLAIMS PROCESS
The Trustee, relying on the books and records of MF Global Inc., the investigation that has traced a majority of the cash transactions during the last week before the bankruptcy of MF Global Inc., and the claims process, currently believes there is at least a $1.6 billion gap between the value of the Trustee’s estimate of potentially allowable commodities claims and the assets that are currently under the Trustee’s control. This reconfigured estimate is expected to change over time as claims are processed and assets recovered, and depending on claims reconciliation and the ultimate outcome of claims the Trustee may contest, the estimated deficiency may rise or fall in significant amounts. The estimate applies to claims from commodities customers who traded on US exchanges, as well as commodities customers who traded on foreign exchanges, including approximately $700 million that the Trustee is disputing with the Joint Special Administrators of MF Global UK Limited.

The Trustee has returned approximately $3.9 billion in property from US depositories to former commodities customers in three bulk transfers since MF Global went into bankruptcy on October 31, 2011. Currently, the Trustee has approximately $1.4 billion in assets under his control, which is being held in reserve.

The Trustee and his staff continue to review and tabulate claims made by former MF Global Inc. commodities customers against the MF Global Inc. estate, which were submitted prior to the January 31, 2012 claims deadline.

Early estimates of the analysis of commodities claims show approximately 40% of the US commodity claims came from five states: California, Florida, Illinois, New York and Texas. Approximately 91% of all commodities claims seek less than $100,000, taking into account the previous return of 72% of the US segregated customer property to former retail customers with US futures positions.

Claims will be verified for accuracy and duplicate claims will be identified. Determination letters are being issued to former customers on a rolling basis. The determination letter will acknowledge receipt of the claim and provide information on whether the claim has been allowed, denied, reclassified or requires further reconciliation or information.

The Trustee is eager to make additional distributions to former MF Global Inc. customers as soon as possible. However, the Trustee is required by law to hold an appropriate reserve of funds until disputed claims are resolved either through negotiation or by the Court. At this time, the Trustee anticipates significant disputed claims against the MF Global Inc. estate by MF Global Holdings Ltd., MF Global UK Limited, and other entities. The Trustee will move to attempt to resolve these claims as quickly as possible, but it is uncertain how long resolution will take. Therefore, it is not known at this time when the Trustee will be legally able to make additional distributions.

While securities customers seeking to receive maximum protection under the Securities Investor Protection Act were asked to file claims by January 31st, the claim registration period for securities customers does not close until June 2, 2012. The gap between securities claims values and assets under the Trustee’s control cannot be accurately estimated at this time.

Debtwire Report: MFG Reserve Fund could boost 4d recovery to 96% if distributed to customers

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Debtwire released the following story noting that if the MFG reserve fund were distributed to customers, that would boost the recovery to 96% for customers in 4d segregation.

Full text of the article below:

(DW) MF Global reserve fund growth elevates recovery prospects for domestic customer claims

The recent discovery that MF Global’s reserve fund grew by 45% in January to USD 1.455bn could be a boon for the bankrupt broker dealer’s domestic customer claimants in their hunt to maximize recovery, according to two buysiders and a sellside analyst. Other assets such as new litigation claims and real estate transfers could also work to enhance customer prospects, they added.

Domestic claim holders have been trying to calculate their expected recovery with limited information since MF Global filed for Chapter 11 protection on Halloween. The matter is clouded by the debtor’s inability to account for USD 1.2bn of missing customer money, the location of US customer funds in foreign jurisdictions, and the ambiguous provenance of funds that have actually been located overseas.

Given the value of the estate that’s been accounted for to date, domestic customer account holders are in line for a 72% recovery. But if the USD 1.455bn reserve is fully delivered to domestic customers it could add another 24 cents of upside, lifting recovery to 96%, the sources said.

The market is trading the claims within an 87-90 range, factoring in the chance that the reserve pool could get beset by competing claimants arguing for some entitlement, according to one of the buysiders. The reserve – which came to light in a court filing earlier this month — consists of actual funds that are already under control of SIPA Trustee James Giddens. However, the money is still subject to having other claims levied against it, such as from MF Global’s UK entity, the sources said.

“If it could be proved without a doubt that this money belonged to customers, it would likely have been distributed already,” said Kevin Starke, senior analyst at CRT Capital

More irons in the fire

Even if the reserve amount is diluted by overseas claims, domestic claimants may benefit from other potential windfalls, according to the sources.

A way that this could happen is if the overall amount of the customer claims pool is reduced from its current level of USD 5.9bn – USD 6bn, the sources said. Giddens previously allowed that the figure could drop as low as USD 5.5bn.

Additional upside for domestic customers could come by way of more general estate property getting allocated to customers, the sources continued. So far the Trustee has marshaled USD 290.43m of general property to the estate for dispersion.

A third variable for domestic customers to reach for is a USD 175m claim against the UK estate for a suspect wire transfer, the existence of which popped up in a report Giddens filed with the court on Monday (6 February).

In the same Monday report, Giddens wrote that his investigation found that funds in customer accounts thought to exceed segregation requirements were regularly siphoned off to fund other MF Global activities. In the days leading up to bankruptcy, when margin calls mounted, including USD 553m related to a USD 6.3bn repo-to-maturity sovereign debt trade, customer accounts were lost in the chaos. In searching for missing funds, the Trustee has examined over 20,000 transactions totaling USD 327bn across 47 bank accounts and eight banks.

Another recent event shaping the case came to light on 3 February, when the UK administrator released a status report that detailed claims progress. The report implied that the MF UK subsidiary could prove solvent, meaning its positive value could accrue to holdco creditors. MF UK received 2,643 claims totaling USD 2.1bn, but only USD 950m are client claims. Over 90% of this money resides at the UK, according to the report. The UK Administrators will file an update by 29 February, which is also the client bar date.

MFGI Hearing Update

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MF Global Inc. Hearing – Agenda

For all three items listed in the attached Agenda, Judge Glenn indicated that he would enter orders granting the requests.  In fact, Orders approving each of those requests have already been entered on the docket.

Then Judge Glenn went away from the Agenda and remarked about the briefing that had been submitted on the classification and treatment of customers and other creditors of MFGI (which he described as the “Distribution Rules”).  He said that there appeared to be general agreement among the parties that had submitted briefs on some issues, but as to other issues there was clearly some disagreement.   He identified the “physicals” customers as an example of an area of controversy, and he noted that the resolution of the rights or categorization of various ”physicals” customers may be “fact specific” (i.e., “how was the property held?”).

He indicated that, since he does not have a motion or objection before him, he is not expecting to rule on these issues “in the abstract” at this time.  He also said that, unlike in a typical bankruptcy case where a creditor submits a proof of claim which will automatically be “allowed” unless it is objected to, in this SIPA-driven proceeding the Trustee is supposed to make a determination, and then the customer is required to object if the customer disagrees with the Trustee’s determination.

Especially since the deadline for commodity customers to submit claims has now passed, Judge Glenn said that he wanted the SIPA Trustee to submit a report, in writing and filed in the public record of the case, describing the “pace of review” of those claims, and an expected timeline for determinations.  Judge Glenn didn’t provide any detailed instructions on the content or format of this report, and counsel for the SIPA Trustee hinted that it might be sent to Judge Glenn in the form of a letter which would be included in the case record.

Next Omnibus Hearings

For your calendars, the next few Omnibus Hearings have been scheduled as follows:

March 6, 2012 at 10:00 a.m. (EST)

April 12, 2012 at 10:00 a.m. (EST)

May 2, 2012 at 10:00 a.m. (EST)

Our interpretation of Judge Glenn’s decision on Sapere’s Motion

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I’ve seen a lot of panic today from customers who are very concerned with regards to Judge Glenn denying Sapere’s motion asking for discovery and priority over MF Global Holdings assets. Granted, everyone is on edge in light of this week’s see-saw-like news where we were told 1.2B in cash mystically “vaporized” by the WSJ, then the NY Times refuted it saying most of the money has been traced, then today that customers don’t have priority over Holding company assets yet.

The key word is “yet.”

While the CCC filed a letter of support for Sapere’s motion, our legal team felt that while the outcome of the motion if granted would obviously be a positive one, their filing was premature at this stage in the case. We actually filed a brief prior to their filing that is still awaiting hearing, but makes sound arguments for the priority of funds that can be traced to MFGH or any other entities. Please give it a read, as we think it has a good chance of success, and it also contains signed letters of support from two FCM’s: Dorman and PFG. CCC Brief in Response to Trustee Distribution Memorandum

So please, take a breathe and rest assured that the CCC has been very busy behind the scenes lately and has some big things coming soon.

Yours truly,
James

Trustee will comply with Form 1099 reporting

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I received the following via e-mail this morning:

The Trustee will comply with all required Form 1099 reporting. On January 31, 2012, the Trustee requested a 30-day extension for the filing and mailing of Forms 1099-MISC, 1099-INT, and 1099-DIV. Forms 1099-B are not required to be mailed to recipients until February 15, 2012.

The Trustee will issue an announcement on his website on the date that Forms 1099 are mailed. Forms 1099 will include a telephone number for inquiries regarding the contents of the Form.

See also http://dm.epiq11.com/MFG/Project/default.aspx#Section2_15