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MF Global (NYSE: MF), a leading broker of exchange-traded futures and options, announced that during the early hours of Wednesday morning, February 27, a registered representative in one of its U.S. branch offices, trading in the wheat futures market in his personal account, substantially exceeded his authorized trading limit. The registered representative concerned has been terminated effective immediately.
A failure in one of the company's retail order entry systems permitted the representative to establish significant positions in his own account which were liquidated later that morning. The unauthorized activity resulted in him incurring a loss of $141.5 million, which the company, as a clearing member, is responsible to settle at the clearinghouse. As a result, the company recorded a bad debt provision for the full amount.
The company believes it has made the appropriate adjustments to its order entry systems to prevent a recurrence of unauthorized trading of this type in the future. In addition, MF Global has engaged a third-party risk technology consultant to review its relevant order entry systems.
Client funds are not at all impacted by this event.
The company's capital and liquidity position remain strong. The loss represents approximately six percent of the company's equity, in addition to which it has close to $1.5 billion in undrawn committed credit facilities.
In the company's fourth fiscal quarter to date, net revenues are exceeding all comparable prior periods of this fiscal year. MF Global remains confident in its business prospects and long-term financial performance.
The company will hold a conference call at 11:00 a.m. EST today to discuss the matter.
Dial-in information: U.S. (800) 659-2056International (617) 614-2714
Participant Passcode: 47046771
A live audio webcast of the presentation will be available on the investor relations section of the MF Global Web site and will be available for replay shortly after the event.
