“Oh where, oh where has the money gone”? That’s what investors trusting their portfolios to MF Global Holdings are singing right now. $1.2 billion in customer funds cannot be found, and no one seems to have any idea what happened to those investment accounts. You might have seen this in the news.
The president of the now bankrupt MF Global, former New Jersey governor Jon Corzine, testified at a Congressional Committee Hearing on December 13. In his opening remarks, he said:
“I remain deeply concerned about the impact that the unreconciled and frozen funds have on MF Global’s customers and others. I simply do not know where the money is, or why the accounts have not been reconciled to date.”
So, what went wrong? Losing money when markets fluctuate is one thing, but to simply have your funds disappear is quite another. Was there a giant “red flag” that investors should have known about before they sent in their checks?
Yes, there were flags. I think one of the most obvious warning signs was that MF Global took physical custody of their client’s monies. Although client funds are supposed to be in segregated customer accounts that are walled off from the firm’s accounts, the simple fact is that the clients probably made out their checks, or had their funds transferred directly to MF Global Holdings.
The key word here is physical custody. We here at Financial Abundance do not nor will we ever take physical custody of our client’s monies. We feel so strongly about this, that we have included that fact in our filings with our regulator. (The filing is called a Form ADV Part II. If you’d like a copy, let me know and I’ll get it out to you.)
So how would you make out your investment check, or have your funds transferred? Always, Always, Always be sure that your funds are sent to an independent third-party custodian with a name that you recognize, like Charles Schwab, which sends out monthly statements of investors accounts.
Here’s a link to a Wall Street Journal video commentary on Mr. Corzine’s remarks:
http://online.wsj.com/video/missing-mf-global-funds-could-top-12-billion/DA235751-0AF9-46EF-B623-13316EEA17E4.html