MF Global Parent Allowed to Restrict Some Information About Brokerage Unit
By Tiffany Kary – Mar 7, 2012 10:46 AM ET
MF Global Holdings Ltd (MFGLQ). won a judge’s permission to implement rules that will restrict the sharing of confidential information about its failed brokerage.
U.S. Bankruptcy Judge Martin Glenn approved the rules proposed by Louis Freeh, the trustee acting for the parent’s estate and its creditors, according to court papers filed yesterday in Manhattan. Customers had objected to the proposal, questioning JPMorgan Chase & Co. (JPM)’s role in deciding whether they can access information about missing customer funds.
An official creditors committee had agreed to the protective order and said customers of the failed brokerage weren’t entitled to the same information as they were. While the parent company is unwinding to repay creditors such as JPMorgan, the brokerage, MF Global Inc., is unwinding to repay former customers under a separate trustee, James Giddens.
“Creditor demands for information should not be permitted to compromise the committee’s important role in the cases and be used as a subterfuge to obtain discovery,” Glenn said. He said that he also has denied discovery requests by private parties so that probes by the two trustees can “proceed unimpeded.”
The rules call for Freeh to help the creditors’ committee identify confidential information. The committee must respond to written requests to disclose information within 30 days, either to give access or explain why the information won’t be disclosed.
Six customers with at least $2.4 million in claims against the brokerage said the rules will restrict or delay their access to information about money believed to be missing from customer accounts. The holding company has the interests of creditors as its priority, while the brokerage has a duty to customers, the group said.
The customers also have sued New York-based JPMorgan, the company’s largest lender, over its role in MF Global’s collapse. Giddens currently estimates the gap between customer claims and funds available to pay them at $1.6 billion.
“It is patently unfair for JPMC, a member of the creditors’ committee and a defendant in several of the class actions filed on behalf of futures customers, to have a say in whether customers will have access to information,” according to the customers’ filing objecting to the confidentiality rules.
Glenn said the rules don’t resolve all issues related to access to information. His order isn’t “intended to limit or control discovery that may be authorized by the bankruptcy court or the district courts,” Glenn said.
MF Global Holdings (MFGLQ), run by former Goldman Sachs Group Inc. (GS) co-chairman Jon Corzine until his Nov. 4 resignation, filed the eighth-largest U.S. bankruptcy after a $6.3 billion trade on its own behalf on bonds of some of Europe’s most indebted nations led to margin calls. Its bankruptcy filing listed assets of $41 billion and debt of $39.7 billion.
The brokerage case is Securities Investor Protection Corp. v. MF Global Inc., 11-02790, U.S. District Court, Southern District of New York (Manhattan). The parent’s bankruptcy case is MF Global Holdings Ltd., 11-bk-15059, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
To contact the reporter on this story: Tiffany Kary in New York at firstname.lastname@example.org