MF Global and the great Wall St re-hypothecation scandal
12/7/2011
By Christopher Elias (UK)

Business Law Research Note: This version of the article has been modified from the original to make it clear that re-pledged collateral may come from straight repos and not just re-hypothecation. Some of the financial figures from banks' disclosures have been adjusted accordingly.

(Business Law Currents) A legal loophole in international brokerage regulations means that few, if any, clients of MF Global are likely to get their money back. Although details of the drama are still unfolding, it appears that MF Global and some of its Wall Street counterparts have been actively and aggressively circumventing U.S. securities rules at the expense (quite literally) of their clients.

MF Global's bankruptcy revelations concerning missing client money suggest that funds were not inadvertently misplaced or gobbled up in MF’s dying hours, but were instead appropriated as part of a mass Wall St manipulation of brokerage rules that allowed for the wholesale acquisition and sale of client funds through re-hypothecation. A loophole appears to have allowed MF Global, and many others, to use its own clients’ funds to finance an enormous $6.2 billion Eurozone repo bet.

CONTINUE: [link to newsandinsight.thomsonreuters.com]