Reuters: Regulatory News: MF Global executive says banks denied transfer requests

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MF Global executive says banks denied transfer requests Mar 27th 2012, 17:10 Tue Mar 27, 2012 1:10pm EDT * Serwinski says worked relentlessly to cover shortfall * Says a number of transfers were not executed by banks * Due to appear before House panel on Wednesday * Says knowledge limited because was on vacation By Sarah N. Lynch WASHINGTON, March 27 (Reuters) - MF Global's North America chief financial officer plans to tell lawmakers on Wednesday that she desperately sought to transfer funds to cover the customer account shortfall in the final hours before the firm's collapse, but that some banks would not execute them. In prepared testimony, Christine Serwinski also said she was convinced at first the roughly $1 billion deficit in customer funds had to be an accounting error and only learned on the morning of the bankruptcy that the shortfall was real. "We worked relentlessly throughout the early morning hours and, indeed, throughout the day on October 31, to try to bring the segregated and secured accounts back to the appropriate levels," she said in her first public remarks about the events surrounding MF Global Holdings Ltd's collapse and the ongoing search for missing customer money. "Although we were able to move some funds into the (futures brokerage's) segregated and secured accounts, a number of submitted transfers were not executed by the banks, and we were unable to move sufficient funds to make up for the shortfall." Serwinski is due to appear before a House Financial Services panel on Wednesday alongside several other MF Global executives, including General Counsel Laurie Ferber, Chief Financial Officer Henri Steenkamp and Assistant Treasurer Edith O'Brien. Diane Genova, deputy general counsel for JPMorgan Chase & Co , is also due to testify. MF Global filed for bankruptcy on Oct. 31 after investors and customers became rattled over the firm's $6.3 billion bet on European sovereign debt. While regulators and law enforcement officials continue the search for the missing money, the committee is also conducting its own inquiry, and plans to eventually release a report outlining its findings. In her written testimony, Serwinski said she was on vacation during many of the days leading up to the bankruptcy and only sporadically read emails or spoke to colleagues by telephone. "I was reassured that everything was under control and at no time did anyone ever suggest that I should return to the office," she said. However, she decided to return from her trip a day early, on Sunday, Oct. 30, after she learned about the efforts to sell a significant portion of MF Global's business and also about a deficit in a "firm invested" amount of funds that were meant to serve as a buffer to protect customer money. "Though the firm could remain in full regulatory compliance even if the 'firm invested' amount were negative, I had stated clearly and repeatedly that the firm should maintain a positive 'firm invested' balance every day," she said. "To me, even though the regulations would allow it, I was not comfortable with the firm putting customer funds at risk even just overnight in this manner." Serwinski said the deficit came about because the securities brokerage unit of the firm had borrowed money from its futures unit and missed the wire deadline to pay it back. But she was assured the money would be returned by the next day. But in the days that followed, she learned the firm was missing money from its customer accounts. She returned to work thinking the $1 billion deficit was so large that it "could only be the result of an accounting error." On Monday morning, however, the assistant treasurer handed her a piece of paper that said the shortfall was real and not an accounting error. Link this Share this Digg this Email Reprints

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