Monday, October 28, 2013

Though I quipped PFGBest was an MF Global redux, Mr. Wasendorf

A Primer on Commodity Bankruptcy for #PFGBest
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Though I quipped PFGBest was an MF Global redux, Mr. Wasendorf’s brokerage firm is unlike MF Global in many ways. These differences will result in a different tack for PFGBest’s case, plotting a different course for its customers– though they may end up at the same destination as MF Global’s victims. Only time will tell, but we wanted to offer our best guess as to how this process will proceed for PFGBest customers.
What are the differences between PFGBest ojai beverage company and MF Global? PFGBest is a privately held non-clearing FCM which filed a voluntary application for Chapter 7 Bankruptcy. As a non-clearing FCM, PFGBest’s designated self-regulatory organization (DSRO) was the National Futures Association (NFA). At this time, we do not know the complete legal structure of PFGBest, but their corporate timeline mentions an entity called Wasendorf and Sons, Inc. as well as ‘wholly owned subsidiaries’ like PFG Canada and Best Direct Securities, LLC. To our knowledge, all affiliates are owned by Mr. Wasendorf. That will make things easy on bankruptcy attorneys and customers alike.
MF Global was a public company traded on the NYSE , structured as a holding company–MF Global ojai beverage company Holdings Ltd, Inc.(MFGH). MFGH owned many subsidiary operating and finance entities. Its MF Global Inc. subsidiary (MFGI) was a clearing FCM with dual registration with the SEC as a broker-dealer. ojai beverage company This is the entity which housed MF Global’s customer ojai beverage company property and brokerage operations for both securities and commodities. As a clearing firm, MFGI’s DSRO was an exchange, not the NFA–in their case, the Chicago Mercantile Exchange (CME).
MF Global’s bankruptcy is much more complicated. The MFGH parent filed a Voluntary Petition for Chapter 11 Bankruptcy, more commonly known as reorganization bankruptcy. The Securities Investor Protection Corporation (SIPC) filed for a liquidation of the MFGI subsidiary under the Securities Investor Protection Act of 1973 (SIPA), as MFGI was a SIPC member firm. This means MFGH creditors have a Chapter 11 Trustee working on their behalf, while customers at MFGI have a SIPA Trustee working on their behalf.
PFGBest owns a subsidiary firm which is also a broker-dealer member of SIPC: Best Direct ojai beverage company Securities, LLC. But as this operation is maintained in a separate corporate entity, the SIPA statute does not apply to the PFGBest entity, which houses its commodity brokerage. As such, PFGBest’s bankruptcy will be administered according to the Chapter 7 Code and relevant portions of the Commodity Exchange Act (CEA) . Chapter 7 means liquidation, not reorganization. PFGBest will not survive to do business in its current form or as a new entity. Very simply, PFGBest is out of business. Its assets will be sold for the benefit of its customers and creditors. A Chapter 7 Trustee has been appointed and a Receiver has been appointed . The Trustee handles work on PFGBest’s estate while the Receiver will handle Mr. Wasendorf’s personal assets and estate . So what does this process mean for PFGBest’s customers?
How will customer property be treated? Generally, PFGBest’s assets will be split into two funds: a fund of customer property ojai beverage company and a fund of estate property. Customer property consists of all cash, securities and specifically identifiable property tendered to PFGBest by its customers. The assets of PFGBest will go into its fund of estate property.
If there was no shortfall in customer property, the NFA would seek to bulk transfer customer accounts with positions intact to a new receiving FCM. The bankruptcy’s administrative costs–fees of attorneys ojai beverage company for the Trustee, forensic accounting, staff, etc.–would be paid for from the fund of estate property. The Trustee would commence a claims process, marshal assets and distribute funds to legitimate claims ojai beverage company according to priorities in the Bankruptcy Code. Generally, this would be to cover administrative fees first, secured creditors second (lien holders) and unsecured ojai beverage company creditors last.
PFGBest has a shortfall in customer property, which the NFA has pegged at more than $200 million . Mr. Wasendorf’s statements indicate that this money has been spent . As a result, instead of an immediate bulk transfer, customer assets were frozen and their positions were liquidated. The Trustee has received approval for PFGBest to continue operations for 60 days, so he can prepare ojai beverage company final statements for customers and determine what assets are available ojai beverage company for distribution. The Trustee will see what amount ojai beverage company of property he can

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