March 22, 2012

Oh, it's still missing!? The $1.6 billion dollars that "vaporized" from MF Global!? Let me refresh everyone's memory as, apparently, a fairly significant "vaporization of capital" warrants only brief news coverage because we have much more urgent things to cover like "The Situation," whoever that is, heading to rehab. MF Global mixed its clients' money with its own and, now that MF Global is in bankruptcy, a bunch of that client money has disappeared. Important and newsworthy idea? Of course it... wait, nevermind, the Kardashians just came on.

So now what is proposed is a new "Corzine Rule." Mr. Corzine, the former governor of New Jersey, former Goldman Sachs head and more terrifying, potential FOMC Chairman, was the president of MF Global when said funds were "vaporized". The proposal would make it mandatory for a futures firm's principal to sign off on any money moved from client segregated funds if it is more than 25% of the firms excess segregated funds. Now, call me crazy here, but I think that the first person to approve the funds being moved should be the client. In the MF Global case this didn't happen. I am also of the understanding that at a future's fund, much like at a brokerage firm, comingling client funds and firm funds is illegal! So, in the case of MF Global, what the firm did was already illegal? But we're considering a new law to make it doubly illegal!? Really??

Let me get this straight. Jon Corzine is still not in jail nor is he charged with anything, the $1.6 billion is nowhere to be found and we are proposing a new rule which at its core addresses something that is already illegal. Wow. Anyone think a new law enforced as weakly as the old laws will change anything!?

Is it any wonder that average people look at what is going on in the financial industry and just shake their heads in disbelief? It's my industry and that's precisely what I have been doing for 4 years now. Where has the idea of client service gone? Where has the idea gone that our single purpose as professional financial advisors is to serve our clients? Actually enforcing the laws we have would go a long way toward pushing people like Corzine, whose self-interest trumped his committment to his clients, out of the business.

We don't need a new law; we need to return to the idea that we work for our clients.

 

(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author's opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).

Doug Hendee, CFP(R)

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