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MF Global’s Tone at the Top: Throw the Underlings under the Bus

December 13, 2011

Photo by e_monk. Some rights reserved.

As has been widely reported, no one at MF Global seems to know where an estimated $1.2 billion in customer money went. Not CEO Jon Corzine; not President and COO Bradley Abelow; and not CFO Henri Steenkamp.

All are “distressed,” “puzzled,” and “deeply sorry.” But still, $1.2 billion is missing.

All have heroically foregone pleading the Fifth in order to appear before Congress to testify that they never intended to suggest anything illegal.  If someone else misconstrued what they said, well, it was an unfortunate misunderstanding. But certainly not intentional.

So if a CEO, COO and CFO can all plead ignorance, who does have knowledge? Who is responsible?

CFO Steenkamp helpfully pointed out that MF Global is a global company (the word is in its name, afterall). And he was the CFO of the holding company – a global holding company. The missing money was located in Chicago at a subsidiary over which he had no direct contact, supervision, or apparently, responsibility. He notes, “Direct involvement with operational matters such as bank accounts or fund transfers has never been part of my duties.”

Such claims should give the SEC pause as it considers the procedures for registering security-based swap dealers and security-based swap participants (“SBS Entities”). The registration process it proposed two months ago foresees a self-certification regime in which a “senior officer” would certify that the SBS Entity has the operational, financial, and compliance capabilities to act as an SBS Entity.

When I previously wrote about that proposal, I described the “senior officer” here as essentially “a body at whom fingers can be pointed, like a regulatory sin eater.”  Had MF Global survived and registered as a SBS Entity, that senior officer would have been roadkill.

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