Many introducing brokers (IBs) have claims in the MF Global Inc. (MFGI) SIPA liquidation. These claims have generally been for IB proprietary funds held in MFGI segregated futures accounts and for commissions earned during October 2011, although some IBs are also evaluating the potential for other claims based on damages and lost profits deriving from MFGI's collapse. Claims for funds held in futures accounts were commodity customer claims that needed to be filed by January 31, 2012. Claims for brokerage commissions earned during October 2011 are general unsecured claims that must be filed by June 2, 2012. The MFGI trustee has indicated that he will provide October 2011 commission run statements to IBs who request them to the extent the run statements are available.
Claim traders are apparently offering around 20 cents on the dollar to purchase general unsecured claims, so IBs may be able to sell their claims for brokerage commissions. However, one issue that IBs selling such claims should be aware of is a 'recourse' term in the transfer agreement that may require the selling IB to return sale proceeds to the buyer in the future if the amount of the IB?s claim that is allowed ends up being less than the claim is valued at in the transfer agreement. This creates a problem for the selling IB because the selling IB may need to book a liability to the extent of the recourse provision, and the liability would impact the selling IB's regulatory net capital calculation. It is possible that a buyer would accept a 'non-recourse' or 'as is' transfer for less money, which may allow the IB to avoid this issue.
Neal R. Stevens
Of Counsel
nstevens@SRCattorneys.com
312 565.1045 tel (chi) | 212 334.7948 tel (nyc)
Schuyler, Roche & Crisham, P.C
www.SRCattorneys.com
