Broker PFGBest freezes funds after owner attempts suicide# Stock
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http://marketday.msnbc.msn.com/_news/2012/07/10/12662685-broker
By msnbc.com staff
PFGBest has frozen its customers’ accounts after an apparent suicide
attempt by its owner Russell R. Wasendorf Sr. and a report from an industry
group that one-half of customer funds at the Iowa-based trading company are
missing.
Late Monday, the National Futures Association (NFA), which regulates the
futures industry, said it has taken an emergency enforcement action against
Peregrine Financial Group, the parent company for the 20-year old broker,
and also against a unit, Peregrine Asset Management.
The emergency enforcement action was taken because PFG had “failed to
demonstrate that it meets capital requirements and segregated funds
requirements,” the association said, adding that it has reason to believe
that PFG “does not have sufficient assets to meet its obligations to its
customers.”
Advertise | AdChoicesThe NFA said PFG may have falsified its bank records,
and that the company only has about $5 million of $225 million it had
claimed to have in a deposit account. PFG is now barred from from soliciting
or accepting any additional customer accounts or customer funds, except as
margin for existing positions, the NFA said.
CNBC’s Bertha Coombs reported Tuesday that the FBI is now involved in the
investigation into the firm.
Separately, The Wall Street Journal said the Commodity Futures Trading
Commission has sued PFGBest parent Peregrine Financial Group and Chief
Executive Russell Wasendorf Sr., alleging fraud, customer-funds violations
and making false statements.
Wasendorf Sr., a 40-year veteran of futures markets, was found in his car
near the company's Iowa headquarters Monday, having apparently attempted
suicide. He was in critical condition at the University of Iowa Hospitals,
according to local news reports.
It is not clear what has happened to the missing funds. PFGBest officials
were not immediately available to comment beyond a notice sent to customers,
saying they could liquidate open trading positions but would not be able to
withdraw cash or initiate any new trades.
Local law enforcement officials said the investigation would likely pass to
the U.S. Attorney's Office shortly.
PFGBest is the latest trading company to implode less than nine month after
MF Global's collapse sent shock waves through U.S. futures brokerages.
MF Global, headed by former New Jersey Gov. Jon Corzine, collapsed in
October after its exposure to European sovereign debt spooked investors. Its
commodity trader customers are missing an estimated $1.6 billion that
vanished from accounts when it was improperly used to cover liquidity gaps
as the company sank, reports say.
While PFGBest is less than one-tenth the size of MF Global, the fallout may
be larger. If the NFA report on the missing funds proves accurate, questions
about the safety of the brokerage model and whether regulators have again
been found wanting are inevitable.
"It's déjà vu all over again," said John Roe, co-founder of the Commodity
Customer Coalition (CCC), set up in the aftermath of MF Global's collapse
last October to help clients recoup their money. In its dying days, MF
Global had been accused of dipping into customer funds to help meet margin
calls.
"Everyone in the industry claimed this couldn't happen again, but if the
money really is missing, then it's like a repeat of MF Global. Anyone who
thought things don't need to change, well, have to reappraise their position
," Roe added.
Reuters contributed to this report.
.
By msnbc.com staff
PFGBest has frozen its customers’ accounts after an apparent suicide
attempt by its owner Russell R. Wasendorf Sr. and a report from an industry
group that one-half of customer funds at the Iowa-based trading company are
missing.
Late Monday, the National Futures Association (NFA), which regulates the
futures industry, said it has taken an emergency enforcement action against
Peregrine Financial Group, the parent company for the 20-year old broker,
and also against a unit, Peregrine Asset Management.
The emergency enforcement action was taken because PFG had “failed to
demonstrate that it meets capital requirements and segregated funds
requirements,” the association said, adding that it has reason to believe
that PFG “does not have sufficient assets to meet its obligations to its
customers.”
Advertise | AdChoicesThe NFA said PFG may have falsified its bank records,
and that the company only has about $5 million of $225 million it had
claimed to have in a deposit account. PFG is now barred from from soliciting
or accepting any additional customer accounts or customer funds, except as
margin for existing positions, the NFA said.
CNBC’s Bertha Coombs reported Tuesday that the FBI is now involved in the
investigation into the firm.
Separately, The Wall Street Journal said the Commodity Futures Trading
Commission has sued PFGBest parent Peregrine Financial Group and Chief
Executive Russell Wasendorf Sr., alleging fraud, customer-funds violations
and making false statements.
Wasendorf Sr., a 40-year veteran of futures markets, was found in his car
near the company's Iowa headquarters Monday, having apparently attempted
suicide. He was in critical condition at the University of Iowa Hospitals,
according to local news reports.
It is not clear what has happened to the missing funds. PFGBest officials
were not immediately available to comment beyond a notice sent to customers,
saying they could liquidate open trading positions but would not be able to
withdraw cash or initiate any new trades.
Local law enforcement officials said the investigation would likely pass to
the U.S. Attorney's Office shortly.
PFGBest is the latest trading company to implode less than nine month after
MF Global's collapse sent shock waves through U.S. futures brokerages.
MF Global, headed by former New Jersey Gov. Jon Corzine, collapsed in
October after its exposure to European sovereign debt spooked investors. Its
commodity trader customers are missing an estimated $1.6 billion that
vanished from accounts when it was improperly used to cover liquidity gaps
as the company sank, reports say.
While PFGBest is less than one-tenth the size of MF Global, the fallout may
be larger. If the NFA report on the missing funds proves accurate, questions
about the safety of the brokerage model and whether regulators have again
been found wanting are inevitable.
"It's déjà vu all over again," said John Roe, co-founder of the Commodity
Customer Coalition (CCC), set up in the aftermath of MF Global's collapse
last October to help clients recoup their money. In its dying days, MF
Global had been accused of dipping into customer funds to help meet margin
calls.
"Everyone in the industry claimed this couldn't happen again, but if the
money really is missing, then it's like a repeat of MF Global. Anyone who
thought things don't need to change, well, have to reappraise their position
," Roe added.
Reuters contributed to this report.
.