Futures Self-Regulators Push on Confirming Account Balances

Date : 07/17/2012 @ 7:40PM
Source : Dow Jones News
Stock : Cme Grp. Inc. (MM) (CME)
Quote : 121.36  0.0 (0.00%) @ 4:00AM

Futures Self-Regulators Push on Confirming Account Balances

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   By Chris Dieterich 
 

NEW YORK--A group of futures-industry self-regulators agreed to accelerate efforts to enable them to electronically confirm customers' balances, an area of concern highlighted by the recent collapse of Peregrine Financial Group Inc.

Tuesday, a special committee of futures-industry self-regulators said they would speed up the registration process for brokers and banks for a Web-based system called Confirmation.com.

Additionally, the committee said it will develop rules requiring brokers to provide regulators with online access that would enable them to confirm account balances at banks that hold customer funds.

Futures brokers with money in banks that aren't registered with the program would be required to move funds to registered banks or would be in violation of the rules.

The Commodity Futures Trading Commission is the federal regulator that oversees the futures industry, but it entrusts some responsibilities to self-regulators such as the National Futures Association.

Peregrine's former chairman has been accused by federal prosecutors of defrauding clients. The CFTC and the NFA have filed separate enforcement actions against Peregrine alleging $215 million in customer funds was missing.

The brokerage's founder and chairman, Russell Wasendorf Sr., was arrested Friday and charged with lying to regulators, days after he was found by police following a suicide attempt.

Mr. Wasendorf's alleged fraud came to light after the NFA sent a team of auditors to review the firm's books and pressure the executive to sign on to a new, online system for verifying accounts.

The self-regulatory committee, comprising the NFA, CME Group Inc. (CME), IntercontinentalExchange Inc. (ICE), the Kansas City Board of Trade and the Minneapolis Grain Exchange, was formed in January following the bankruptcy of MF Global Holdings Ltd., where customer funds also went missing. In May, the committee recommended changes to practices that would require futures brokers to, among other things, file daily reports that show how customer funds are invested and where they are held.

--Jacob Bunge contributed to this article.

Write to Chris Dieterich at christopher.dieterich@dowjones.com

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