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Clawback Risk: Here It Comes!
MF Global’s burned commodity customers turned their ire from Jon Corzine to Jamie Dimon yesterday after MF’s creditor committee, led by Dimon’s JPMorgan Chase, objected to a plan to distribute $2.1 billion to customers who have seen their accounts frozen since Halloween.
In a Manhattan bankruptcy court filing, the creditors committee, which also includes Bank of America and hedge fund Elliott Management, said they want more assurances that the $2.1 billion is not their money.
Among their requests: They want customers to agree in writing that the money they receive could be clawed back.
Even if it turns out that your funds as a customer were stolen through a rank violation of the segregation that is supposed to be in place, JP Morgan and Bank of America, among others, want to be able to claw back your money should their claims against the bankrupt entity prove up.
So much for the alleged “separation” that the entire premise of brokerages rest upon — that your free cash and margin deposits are yours and are not “investments” in the underlying business of the firm you are choosing to trade with.
If you think this risk doesn’t apply to you and you’re in the market in any way, shape or form you’re quite-simply wrong.
This sort of demand by creditors, incidentally, that allegedly-segregated funds be downgraded ex-post-facto to that of a simple creditor is an outrage.
It is my considered opinion that the firms who make such arguments, and their executives, deserve to be dismantled.