Reuters: Regulatory News: UPDATE 1-US House panel suggests SEC-CFTC merger after MF Global

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UPDATE 1-US House panel suggests SEC-CFTC merger after MF Global Nov 15th 2012, 16:58 Thu Nov 15, 2012 11:58am EST By Douwe Miedema and Aruna Viswanatha Nov 15 (Reuters) - A U.S. congressional panel suggested on Thursday that the Securities and Exchange Commission and Commodity Futures Trading Commission merge, saying their failure to share information contributed to the collapse of futures brokerage MF Global. A House of Representatives subcommittee said MF Global's last chief executive officer, Jon Corzine, was the main culprit in the demise of the group in October 2011, but it also blamed missteps by credit rating agencies. The subcommittee's report said Congress should explore whether it would be better for the SEC and CFTC agencies to "streamline their operations or merge into a single financial regulatory agency that would have oversight of capital markets as a whole." Corzine, an ex-Goldman Sachs Group Inc co-chairman who also served as a U.S. senator and as governor of New Jersey, has denied any wrongdoing. U.S. authorities probing the firm's collapse have not brought any formal charges. MF Global filed for bankruptcy more than a year ago, as investors scrambled to pull out funds because of credit downgrades and fears about the firm's heavy bets on European sovereign debt. The 2010 Dodd-Frank overhaul of Wall Street has not addressed the fact that U.S. capital markets are overseen by two powerful supervisors, the SEC and the CFTC. Merging the two would be hard to achieve politically because the House Committee on Financial Services oversees the SEC, while the CFTC is under the House Agriculture Committee. The report cited one example showing the two regulators were at odds over what to do when MF Global was in its death throes. MF Global General Counsel Laurie Ferber told one SEC staff member that, against the explicit instructions from that agency, the CFTC had pressured the company to transfer money from a securities reserve account, the report said. "Without telling us? That is unacceptable," SEC Chairman Mary Schapiro said in an email, according to the report. The report also blamed the New York Federal Reserve for giving MF Global a prestigious primary dealership, even though the firm had a track record of "prior risk management failures (and) chronic net losses." Credit rating agencies Moody's and Standard & Poor's, a unit of McGraw-Hill Cos Inc, failed to determine that Corzine's strategy of transforming MF Global into an investment bank would increase the company's risk profile as it took on greater proprietary trading positions, the investigation found. Link this Share this Digg this Email Reprints

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