3.The Trustee has filed a motion, with nearly no notice, that impacts the rights of allMFGI customers, perhaps irreparably. By implementing a claims process, the Trustee effectivelycements this as a liquidation under the Securities Invest
or Protection Act (“SIPA”), even though a
SIPA Liquidation may not actually be in the best interests of all of
There are at least three major flaws in the Trustee’s plan—
although the CommodityCustomer Coalition has only had a few hours to exami
ne the Trustee’s seventy
-six page submissionand prepare this response (Exhibit G is the Trustee
s plan). The Commodity Customer Coalitionrespectfully suggests that it could craft a more efficient plan that returns customer funds far more
quickly than the Trustee’s plan and already has a
n outline of this plan that it is prepared to discusswith the Court at this hearing.5.The first, most glaring, flaw is that the plan (and a SIPA liquidation, generally) doesnot necessarily account for the priority that commodity investors should receive.
Commoditiesinvestors do not necessarily have a right to insurance under the SIPA, in the same manner securities
investors do. Instead, commodities investors rely on the concept of “segregated accounts,” which
are supposed to be held inviolate under CFTC Regulation 4.20(c). They also rely on the right of
customers in a futures commission merchant (or “FCM”) to receive a first
-priority right of recoveryunder 11 U.S.C. § 766(h) and 17 C.F.R. § 190.08.6.Yet, under a SIPA liquidation, it is not clear that Securities Investor Protection
Corporation (“SIPC”) agrees that commodity customers will receive a first
-priority right of recovery.
A SIPA liquidation is the tail wagging the dog, given that SIPC only has a stated guarantee of approximately400 securities accounts, as compared to over 50,000 active commodity accounts and upwards of 150,000 totalcommodity accounts. Moreover, neither the Trustee nor SIPC has taken a position as to whether the cash, T-Bills, and other cash equivalents held in commodity accounts are covered by SIPC, nor has the Trusteedelineated his view as to how the duties of the Trustee in liquidating a commodity futures merchant may beinconsistent with SIPA.
11-02790-mg Doc 251 Filed 11/16/11 Entered 11/16/11 14:00:47 Main DocumentPg 3 of 6