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MF Global Trustee's Motion to Begin Customer Claims Process

MF Global Trustee's Motion to Begin Customer Claims Process

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Published by DealBook
Motion by the trustee overseeing the liquidation of MF Global's brokerage seeking permission to begin collecting customer claims for funds held at the collapsed firm.
Motion by the trustee overseeing the liquidation of MF Global's brokerage seeking permission to begin collecting customer claims for funds held at the collapsed firm.

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Published by: DealBook on Nov 15, 2011
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11/27/2011

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Hearing Date: November 16, 2011 at 3:30 p.m. (Prevailing Eastern Time)
James B. Kobak, Jr.
 
Christopher K. Kiplok Josiah S. TragerMeaghan C. GraggHUGHES HUBBARD & REED LLPOne Battery Park PlazaNew York, New York 10004Telephone: (212) 837-6000Facsimile: (212) 422-4726Attorneys for James W. Giddens,Trustee for the SIPA Liquidation of MF Global Inc.
UNITED STATES BANKRUPTCY COURTSOUTHERN DISTRICT OF NEW YORK
 In reMF GLOBAL INC.,Debtor.Case No. 11-2790 (MG) SIPA
TRUSTEE’S EXPEDITED APPLICATION FOR ENTRY OF AN ORDERESTABLISHING PARALLEL CLAIMS PROCESSES FOR COMMODITY FUTURESCUSTOMER AND SECURITIES CUSTOMER CLAIMS; APPROVING FORM ANDMANNER OF PUBLICATION AND MAILING OF NOTICE OF COMMENCEMENT;SPECIFYING PROCEDURES AND FORMS FOR FILING, INFORMAL AND FORMALDETERMINATION, AND ADJUDICATION OF CLAIMS;FIXING A MEETING OF CUSTOMERS AND OTHER CREDITORS;AND FIXING INTERIM REPORTING PURSUANT TO SIPA
James W. Giddens (the “Trustee”), as Trustee for the liquidation of the businessof MF Global Inc. (“MFGI” or the “Debtor”) under the Securities Investor Protection Act of 1970, as amended (“SIPA”), 15 U.S.C. § 78aaa
et seq
., by and through his undersigned counsel,respectfully requests entry of an order (1) establishing parallel claims processes for commodityfutures customer and securities customer claims; (2) approving the form and manner of thepublication and mailing of the notice of commencement of this proceeding; (3) specifyingprocedures and forms for the filing, determination, and adjudication of claims; (4) fixing a
11-02790-mg Doc 144 Filed 11/15/11 Entered 11/15/11 13:53:25 Main DocumentPg 1 of 76
 
 2meeting of customers and other creditors; and (5) fixing an interim reporting procedure pursuantto SIPA. In support of this expedited application, the Trustee respectfully states as follows:
Preliminary Statement
1.
 
The complexity and size of MFGI’s business operations as a U.S. broker-dealer and futures commission merchant (“FCM”) give rise to the unprecedented nature of thisSIPA liquidation. For the benefit of MFGI’s former customers, and in furtherance of theTrustee’s statutory mandate to promptly satisfy customer claims and liquidate MFGI in anorderly fashion, the expedited claims procedure proposed by the Trustee, as outlined in thisexpedited application, will facilitate the Trustee’s ability to receive, process and makedeterminations on the thousands of claims that the Trustee expects to receive from MFGI’sformer customers and other creditors and to allow claimants to monetize their claims in themarket.2.
 
The Trustee proposes to establish separate, parallel, customer claimsprocesses, one for MFGI’s commodity futures customers, and the other for its securitiescustomers, as well as an additional claims process for MFGI’s general creditors. The Trustee,with this Court’s approval, will follow the procedures prescribed in SIPA for determining claimsand making payments to securities customers, and, to the extent not inconsistent with SIPA, willutilize the procedures prescribed in the Commodity Broker Liquidation Provisions and the Part190 Regulations (as those terms are defined herein) for determining claims and makingdistributions to commodity futures customers, with the goal and full intention of making aninterim distribution to customers, if feasible. General creditor claims will be treated inaccordance with the Bankruptcy Code and SIPA.
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 33.
 
This expedited application is an important and necessary procedural steptoward accomplishing the prompt and efficient return of customer property. It is withoutprejudice to additional alternative efforts to return customer property—such as the emergencybulk transfer of open commodity contracts and partial collateral that was approved during thefirst days following the commencement of MFGI’s liquidation. The Trustee continues toinvestigate and explore all alternatives in consultation with the Securities Investor ProtectionCorporation (“SIPC”) and the U.S. Commodity Futures Trading Commission (“CFTC”), and, if feasible, based on the relatively poor state of the Debtor’s books and records and discussionswith regulators, among other things, the Trustee may request to be before this Court againseeking authority to effect a further distribution or transfer to customers.4.
 
The two parallel expedited customer claims proceedings will advance andstreamline the review, determination and distribution process, and help to facilitate potentialinterim distributions to customers, insofar as the pool of customer property subject to pro ratadistribution to commodity futures customers is separate and distinct from the pool of customerproperty subject to pro rata distribution to securities customers (and only securities customersmay be eligible for SIPC advances).5.
 
Although separate, many procedural aspects of the two customer claimsproceedings will overlap as a result of practical considerations and similar proceduralrequirements under SIPA, the Commodity Broker Liquidation Provisions and the Part 190Regulations. For example, as soon as practicable following the entry of a Court order approving,among other things, the form and manner of the publication and mailing of the notice of commencement of this proceeding and specifying procedures and forms for the filing,
11-02790-mg Doc 144 Filed 11/15/11 Entered 11/15/11 13:53:25 Main DocumentPg 3 of 76

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