- Outlines FIA Recommendations for Anti-Fraud Reforms
- Says Insurance Fund Idea Deserves Study
- Calls on Trustee to Accelerate Process for Returning PFG Customer Funds
Walt Lukken, the president and chief executive officer of the Futures Industry Association, testified before the Senate Agriculture Committee today at a hearing on the failures of MF Global and Peregrine Financial Group. In his testimony, Lukken outlined the FIA’s recommendations for improving customer funds protections. These recommendations include strengthening internal controls at futures commission merchants, using technology to independently verify customer balances in segregated accounts, and providing customers with greater visibility on the investment of their funds. Many of these ideas have been already adopted or are being actively considered by regulators.
“There is no easy solution—no magic bullet—that will bring back the lost trust from these incidents,” Lukken told the committee. “Instead, it’s going to take time and hard work across the industry to implement these improvements to earn back the public's trust. Customers deserve better and FIA is wholly committed to winning back their confidence by ensuring they have the highest degree of protections going forward.”
Lukken also stressed the urgency of returning funds to PFG customers. “We strongly encourage the PFG trustee to move to return allowable funds to customers as expeditiously as possible,” he said. Responding to questions from Senator Debbie Stabenow (D-Mich.) and other members of the committee about the idea of creating an insurance fund to protect customers when their FCMs fail, Lukken said FIA is “actively considering” this idea and called for an in-depth analysis of the practical aspects of such a scheme. He cautioned, however, that it may entail substantial costs for market participants.
Today’s hearing marked the third time in three weeks that Lukken has spoken on these topics. At a speech in Chicago on July 18, he unveiled FIA’s four-point plan for addressing the weaknesses exposed by PFG. On July 25, he testified before the House Agriculture Committee and provided its members with FIA’s views on the implementation of the Dodd-Frank Act as well as the oversight of MF Global and PFG.
FIA also participated in the July 26 meeting of the CFTC’s Technology Advisory Committee, which focused on how best to use technological solutions to prevent fraud and misuse of customer funds. FIA also expects to participate in an upcoming CFTC roundtable this month that will examine customer protection issues, including examination techniques and procedures. While FIA is not a regulatory authority like the National Futures Association or the CFTC, its mission since inception has been to protect the public interest through adherence to high standards of professional conduct and financial integrity.
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