Seward & Kissel LLP is pleased to provide a brief summary of the claims process for MF Global Inc. (“MFGI”) and a description of what clients can expect in the liquidation proceeding of MFGI under the Securities Investor Protection Act of 1970 (“SIPA”) in the coming weeks. If you would like additional information concerning the SIPA proceeding of MFGI (the “SIPA Case”) or information concerning the chapter 11 cases of MF Global Holdings Ltd. and MF Global Finance USA Inc. (the “Chapter 11 Cases”), we would be happy to discuss these matters with you in greater detail.
Order Approving Claims Processes for the SIPA Case
On November 23, 2011, the Bankruptcy Court for the Southern District of New York (the “Court”) entered an order approving separate, parallel claims processes for former commodity futures customers and former securities customers of MFGI, and an additional claims process for general creditors of MFGI (the “Bar Date Order”). The Bar Date Order establishes claims procedures in the SIPA Case alone, and these procedures are not applicable to the Chapter 11 Cases of MF Global Holdings Ltd. and MF Global Finance USA Inc. A separate set of claims procedures will be adopted by the Court with respect to the Chapter 11 Cases.
Under the Bar Date Order, the deadline for former commodity futures customers seeking priority “customer” status and for former securities customers seeking the maximum possible protection under SIPA is January 31, 2012 (the “Customer Bar Date”). The Bar Date Order establishes June 2, 2012 as the deadline for submitting general creditor claims in the SIPA Case (the “General Creditor Bar Date”). Any claim submitted after the Customer Bar Date but before the General Creditor Bar Date may be afforded general creditor status or less protection under SIPA, as applicable.
On or before December 2, 2011, the trustee overseeing the SIPA Case (the “Trustee”) will send MFGI customers copies of the applicable claim forms and instructions, along with a notice of commencement of the SIPA Case. Copies of the claim forms and related instructions are also available at www.mfglobaltrustee.com or may be received by writing to the Trustee at the following address:
Attorneys for James W. Giddens
Trustee for the SIPA Liquidation of MF Global Inc.
Hughes Hubbard & Reed LLP
One Battery Park Plaza
New York, New York 10004
Please note that the Court-approved customer claims processes are separate and distinct from the bulk transfers of customer accounts and property by the Trustee and, to the extent that accounts with MFGI are not transferred or assets remain at MFGI, customers are required to assert claims against MFGI in respect of the positions and assets that remain trapped in their accounts. To receive customer status or the maximum possible protection under SIPA, as applicable, all present and former commodity futures customers and securities customers must submit their claims so that they are received by the Trustee on or before the Customer Bar Date. Any claim submitted after the General Creditor Bar Date will be absolutely barred.
Bulk Transfer to Former Customers with U.S. Futures Positions
It is anticipated that the Trustee will seek Court approval of a third bulk transfer early this week that would “true up” or restore 60% of the assets that should have been segregated in U.S. depositories to all former commodity futures customers with U.S. futures positions. If approved by the Court, this bulk transfer would be implemented in early December with the cooperation of the U.S. Commodity Futures Trading Commission, the Securities Investor Protection Corporation, the Chicago Mercantile Exchange and others.
The Trustee has indicated that, after the initial transfer of approximately $1.5 billion in collateral in customer commodities accounts with open commodity positions and after the completion of the subsequent transfer of $520 million in cash and cash equivalents, he will have approximately $1.6 billion on hand. Although, this third bulk transfer, if approved, would presumably exhaust most, if not all, of the $1.6 billion under the Trustee’s current control, the Trustee has stated that he expects that U.S. depositories will make additional funds available to the Trustee in the coming weeks. With respect to the recovery of assets located in foreign depositories, the Trustee anticipates that this process will take more time, as most of these assets are under the control of foreign insolvency trustees.
There still remains a shortfall in customer segregated property, which the Trustee recently estimated could be as much as $1.2 billion or more, an amount significantly greater than previous estimates.
Requests for Additional Information
General information regarding the SIPA Case, including additional updates posted by the Trustee, is available online at http://dm.epiq11.com/MFG. If you require any further information regarding MF Global, the SIPA Case, the Bar Date Order, the expected bulk transfer to customers with U.S. futures positions or claims that you may have against MFGI or any of its affiliates, please feel free to contact your primary attorney at Seward & Kissel LLP.
