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Opposition of Trustee to I the Motion f - Mg Opposition

Opposition of Trustee to I the Motion f - Mg Opposition

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Published by: englishbob618 on Nov 21, 2011
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11/21/2011

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Hearing Date: November 22, 2011 at 3:00 p.m. (Prevailing Eastern Time)
James B. Kobak, Jr.
 
Christopher K. Kiplok Jeffrey S. MargolinDustin P. SmithHUGHES 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
OPPOSITION OF THE TRUSTEE TO (i) THE MOTION FOR AN ORDERAUTHORIZING THE APPOINTMENT OF AN OFFICIAL COMMITTEEOF COMMODITY BROKER CUSTOMERS AND APPROVING COMPENSATIONOF ALLOWED FEES AND EXPENSES OF COMMITTEE PROFESSIONALSAND (ii) THE MOTION FOR AN APPOINTMENT OF AN OFFICIALCOMMITTEE OF COMMODITY BROKER CUSTOMERS
James W. Giddens (the “Trustee”), as Trustee for the liquidation of the businessof MF Global Inc. (“MFGI”) under the Securities Investor Protection Act of 1970, as amended(“SIPA”), 15 U.S.C. §§ 78aaa
et seq
., by and through his undersigned counsel, files thisopposition to (i) the Motion for Order Authorizing the Appointment of an Official Committee of Commodity Broker Customers and Approving Compensation of Allowed Fees and Expenses of Committee Professionals (the “Steering Motion,” ECF No. 161) brought by a steering committeeof certain commodity broker customers (the “Steering Movants”), and (ii) the Motion forAppointment of an Official Committee of Commodity Broker Customers (the “CoalitionMotion,” ECF No. 354, and collectively with the Steering Motion, the “Motions”) brought by a
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2coalition of certain commodity broker customers (the “Coalition Movants,” and collectively withthe Steering Movants, the “Movants”), and respectfully states as follows:
PRELIMINARY STATEMENT
1.
 
Through the Motions, the Movants improperly attempt to establish anofficial committee of commodity broker customers to be paid from MFGI’s commodity customerproperty estate. There is no authority or precedent for the relief the Movants seek. SIPA doesnot provide for appointment of a creditors’ committee, and no such committee has beenappointed in the forty-year history of the statute. The establishment of a self-nominatedcommittee of commodity broker customers with self-selected counsel that is unrepresentative of differently situated commodities claimants, securities claimants, and other creditors, in theunorthodox manner requested by the Movants, would only serve to cause a duplication of effortsand a waste of customer assets in a proceeding in which efficient administration and preservationof customer assets is the paramount concern.2.
 
While the Trustee opposes the Movants’ request for the appointment of anauthorized customer committee whose expenses would be paid from the commodity customerproperty estate, the Trustee has told counsel to the Steering Movants that, as in the SIPAliquidation of Lehman Brothers Inc. and other SIPA liquidations, he is prepared to reportregularly to appropriate ad hoc committees and industry groups. These professional interactionscan take place without eroding the fund of segregated customer property with professional feesand expenses and without duplicating the roles already played by the Securities InvestorProtection Corporation (“SIPC”), the Securities and Exchange Commission (“SEC”), and theCommodity Futures Trading Commission (“CFTC”).
Since his appointment, the Trustee and hisprofessionals have responded to calls, emails, and other correspondence from customers of MFGI,and the Trustee’s professionals have met with claimant constituencies, including certain
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3
representatives of the Movants, to attempt to address their issues and concerns. The Trustee willcontinue to meet and work with appropriate ad hoc and industry groups without the need for acommittee.
 3.
 
The factual predicates for the Movants’ applications also ignore the recordto date. The Movants attempt to justify the creation of a customer committee on the possibilityof delay in distributing assets to certain customers. Within hours of his appointment on October31, 2011, and against a backdrop of shortfalls in segregated funds and records that are far fromwholly reliable, the Trustee moved and has already effected the transfer of three million
openpositions associated with over 14,500 commodity customer accounts. This means that over $1.5billion in collateral associated with those positions was returned to customers and to the marketwithin a few days of the commencement of this liquidation. The Trustee is now effecting the transferof an additional approximately $500 million to the holders of 23,300 commodities client accountsthat held only cash in their accounts on October 31, 2011. The Trustee also moved within days of hisappointment to establish an expedited claims process in order to allow the quick and efficientdistribution of funds to customers on a rolling basis. The Trustee has announced publicly and inopen Court that he is actively exploring whether further transfer can be presently made with theassistance and approval of SIPC, the CFTC, and the CME Group Inc. (“CME”).
4.
 
The Steering Movants incorrectly refer to this proceeding as “two cases.”
1
 The liquidation of MFGI is a single proceeding, involving a single broker-dealer, initiated by asingle District Court order. SIPA does not provide for the appointment of a creditors’committee, let alone a committee to represent only a subset of customers. There has never been
1
 
See
Steering Motion at ¶ 1.
11-02790-mg Doc 357 Filed 11/21/11 Entered 11/21/11 09:47:56 Main DocumentPg 3 of 23

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