Recent Developments in the Liquidation Proceeding of MF Global Inc.

December 14, 2011

Seward & Kissel LLP is pleased to provide a brief summary of some of the most important recent developments in the liquidation proceeding of MF Global Inc. (“MFGI”) under the Securities Investor Protection Act of 1970 (“SIPA”). 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.

Third Bulk Transfer to Commodity Futures Customers who Traded on U.S. Futures

On December 12, 2011, the Bankruptcy Court for the Southern District of New York (the “Court”) entered an order approving the motion of the trustee overseeing the SIPA Case (the “Trustee”) requesting a third and final interim bulk transfer of up to $2.2 billion to restore approximately 72% of the assets that should have been segregated in U.S. depositories for U.S. futures positions under section 4d of the Commodity Exchange Act (the “U.S. Segregated Customer Property”) to commodity futures customers who traded on U.S. futures. The third bulk transfer will release approximately 80% to 85% of the U.S. Segregated Customer Property under the Trustee’s control and equalize the amounts distributed to commodity futures customers with U.S. Segregated Customer Property, including certain customers that may not have been covered by the Trustee’s previous bulk transfers. The Trustee will maintain approximately $1 billion (or 15% to 20%) of the U.S. Segregated Customer Property, which will not be distributed as part of the third bulk transfer, and will be reserved for possible distribution later in the SIPA Case through the claims process.

Several commodity futures customers with customer property secured in foreign depositories under 17 C.F.R. § 30.7 (the “Foreign Customer Property”) objected to the third bulk transfer on the ground that it favored customers with U.S. positions. The Court overruled these objections and determined that the applicable Commodity Futures Trading Commission (the “CFTC”) regulations required separate treatment for customers with Foreign Customer Property. According to the Trustee, such Foreign Customer Property is currently under the control of MFGI’s former foreign affiliates which are being administered in insolvency proceedings in their home countries. The CFTC indicated that MFGI’s books and records reflected an excess of approximately $900 million in Foreign Customer Property was being held with respect to trading on these foreign exchanges. While the Trustee is pursuing the recovery of Foreign Customer Property on behalf of commodity futures customers with Foreign Customer Property, the prospect for full recovery is uncertain and will take considerably more time.

As with the previous bulk transfers, the third bulk transfer will require the active participation and coordination of the Chicago Mercantile Exchange and the other facilitating derivatives clearing organizations (the “DCOs”). To implement the third bulk transfer, the Trustee will rely on the records of the DCOs and make transfers and distributions on a rolling basis to one or more qualified transferee futures commissions merchants that have agreed to accept such U.S. Segregated Customer Property on behalf of the former MFGI commodity customers. It is anticipated that the third bulk transfer will take approximately two to four weeks to complete.

Sale of Customer Securities Accounts

On December 12, 2011, the Court entered an order authorizing the Trustee to sell and transfer approximately 330 active customer securities accounts to Perrin, Holden & Davenport Capital Corp. (the “Purchaser”) in exchange for a percentage of the commissions associated with such accounts. According to the Trustee, the sale will cover substantially all non-affiliate securities accounts, provided that such accounts did not have a negative liquidation value as of the close of business on the filing date and were not carried solely for the purpose of execution on a DVP/RVP basis (the “Covered Accounts”). Approximately 85% of customers with Covered Accounts should have access to the full amount of the net equity in their accounts as a result of the sale. With respect to the remaining 15% of customers with Covered Accounts with net equity in excess of $1.25 million, these customers should have access to 60% or more of the net equity in their accounts. How much more will depend upon the size of their net equity claims and entitlement to advances from the Securities Investor Protection Corporation (“SIPC”).

To implement the Sale, the Trustee intends to make a partial transfer of approximately 60% of the net equity in the Covered Accounts and SIPC has agreed to cover any missing net equity in the Covered Accounts up to the SIPC limits (i.e., $500,000, including $250,000 in cash for retail customers). Customers of Covered Accounts may keep their accounts with the Purchaser or transfer them to another firm at no cost, provided that such transfer takes place within three months of the sale. The Purchaser will be sending securities customers with Covered Accounts a notice and statement reflecting the status of their accounts at the time they were transferred. Customers of Covered Accounts will have an opportunity to notify the Purchaser and the Trustee of any account discrepancies.

Customer Claims and Requests for Additional Information

To the extent that accounts with MFGI are not transferred or assets remain at MFGI after the transfer or customers dispute the Trustee’s valuations, customers are required to assert claims against MFGI in respect of their positions and assets. Under the claims procedures approved by the Court, former commodity futures customers seeking priority “customer” status and securities customers seeking the maximum possible protection under SIPA must file claims against MFGI so that they are received by January 31, 2012. To facilitate the claims process, the Trustee has made a more user-friendly versions of the commodity customer claim form and the securities customer claim form available at to allow claimants to type their information onto the applicable claim form. A list of frequently asked questions (“FAQs”) and other general information regarding the SIPA Case can also be found at this site.

If you require any further information regarding MF Global, the SIPA Case, the sale of securities accounts, the third bulk transfer to certain commodity futures customers 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.