Reuters: Regulatory News: UPDATE 1-CFTC lawyers: Gensler's MF Global recusal unnecessary

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UPDATE 1-CFTC lawyers: Gensler's MF Global recusal unnecessary Jul 31st 2012, 15:16 Tue Jul 31, 2012 11:16am EDT * Dec. 13 memo showed Gensler, Corzine did not socialize * Findings come amid criticism from Congress -report By Alexandra Alper and Susan Heavey WASHINGTON, July 31 (Reuters) - Commodity Futures Trading Commission Chairman Gary Gensler knew Jon Corzine, the former head of MF Global Holdings Ltd, but the two were not close enough for the CFTC chief to have to recuse himself from a probe of the failed brokerage, according to an internal report. A 15-page confidential memo from agency lawyers first obtained by Bloomberg concluded that although the two men had crossed paths -- including once at the New York Marathon -- they did not socialize closely for 14 years. The memo, dated Dec. 13, came at a time when the U.S. derivatives regulator was being criticized for its oversight of MF Global amid larger concerns about the futures industry and the need for regulation, the report said. "This review concludes that Chairman Gensler was not required to withdraw from matters involving MFGI," the report stated. "From a legal and ethical perspective, Chairman Gensler's participation in Commission matters involving MFGI was not improper." MF Global sought bankruptcy protection in late October, leaving investigators searching for an estimated $1.6 billion in missing customer funds. Another brokerage, Iowa-based Peregrine Financial Group, collapsed earlier this month after regulators discovered that the firm may have misused roughly $200 million of customer money. Gensler has said his agency failed in its oversight of Peregrine, and both scandals have led the industry to consider an insurance fund to protect futures customers. Some U.S. lawmakers have also said Gensler's recusal from the MF Global probe made overseeing the agency's work more difficult. Republican Senators told Gensler his decision to step aside in CFTC's probe was more about preserving his reputation than taking responsibility. CFTC lawyers interviewed Gensler about his relationship with Corzine and told him his recusal was unnecessary before writing the memo in order to have a record of their analysis, an agency spokesman told Bloomberg. A spokesman for Corzine decline to comment. Gensler and Corzine both worked together in the early 1990s at Goldman Sachs, Wall Street's biggest investment bank, but had infrequent discussions after they both left, according to the report. Corzine, a former Democratic U.S. senator and governor of New Jersey, later occasionally crossed paths with Gensler at political events, it said. Link this Share this Digg this Email Reprints

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