Federal Appeals Court Rules Brokerages Can Use Segregated Client Funds to Pay Creditors

A federal appeals court ruled Thursday that brokerages can use segregated client funds to pay off creditors in bankruptcy proceedings.
This essentially means that supposedly segregated customer funds are toast in the event of your brokerage’s bankruptcy.
The only way to remove your counter-party risk is to become your own central bank and hold your assets in your own personal possession.

A ruling in the case of failed futures brokerage Sentinel Management Group could make it more difficult for customers to recoup money lost in the much larger collapse of MF Global, according to Sentinel’s bankruptcy trustee.

A federal appeals court on Thursday upheld a ruling that puts Bank of New York Mellon ahead of former customers of Sentinel in the line of those seeking the return of money lost in the 2007 failure of the suburban Chicago-based futures broker.

The appeals court affirmed an earlier district court ruling that the bank had a “secured position” on a $312 million loan it gave to Sentinel, which turned out to have been secured by customer money.

Futures brokers are required to keep customers’ funds in dedicated accounts to protect them from being used for anything other than client business.

However, Thursday’s ruling suggests that brokerages can use customer funds to pay off other creditors, Sentinel trustee Fred Grede told Reuters.
Read more:

Comments

  1. I hope Bane Capital doesn’t do a leveraged buyout of my broker!

  2. The absurdity continues.  This goes way beyond market rigging.  Show me the law that says an investment company owns MY assets.

  3. This should be a warning to all- get out of there!  They’ll rob you and get away with it.
    Be your own bank, save in Silver and Gold, cash as necessary. 
     

  4. Who is still in paper assets?  When a court rules that your MONEY is not YOUR money you are now in the Never Never Land of  Tinker Ben robbing Peter Pan to pay Captain Hook with your dollars.  Brother Grimm could not write a story as good as this.  The Mad Hatter and  Queen of Hearts now run this show.  I like the saying–when the jig is up you want to be the first out the door.  So the only question remaining is—why is anyone in paper anymore? Don’t be the last to leave.
    But don’t forget to smile when you take your money out of the bank. Otherwise the Grimace Nazis will arrest your a**

  5. We’ve been in meltdown since 2008.  The money you have on Wall St. will soon be all gone.  But then again, I’m preaching to the choir here.  Even the common man can see with all the theft and corruption going on, and the refusal of our government to bring justice to the people and their possessions, says we’re in the last stage before total collapse. Hope you got phyzz.

  6. Never Weaken – In the banking bill shortly after the 2008 crisis , they put in the bill that the brokerage owns ALL your money. All accounts, and they can use it or play with it ANY WAY they want..  Got very little attention but YES, they can steal your money from any account they have access to.  People aren’t paying attention to details.  And those who are aware, believe it won’t happen to them.  Just like Weimar.  Slappy Stacking.

  7. I’ll say it again, like I have since 2001ALL in physical SILVER.  The dollar will eventually go to ZERO.  I believe my advice still stands, and has 11 years of accuracy.

  8. The obvious moral of the story is hold your own assets. This is bad news for paper holders but great news for stackers since they will be headed away from the paper and more towards real assets and silver is the most versitile of all because of it’s smaller denominations. I prefer US silver coins but have some eagles too. In my humble opinion, silver will be the biggest winner over a relatively short period of time. Good fortune to all Doc’s dogs out there and remember…..you are doing the right thing if you’re stackin’ too. YeeeeHaaaaa!

  9. The PTB are masters of getting you looking at their right hand when their left hand is were the real evil lives.  Obviously the courts are bought off.  We saw this with the GM bankruptcy when the Obama administration ignored the law and put the unions ahead of the bond holders and the Supreme Court refused to step in.  Now segregated funds in dedicated accounts are no longer safe at futures brokerage firms.  That’s the right hand.
     
    Easy for us to say “get out”, except that farmers have a legitimate need to hedge and need this service.  What is the small farmer going to do if he can not protect himself by placing hedges on his crop?   Sell the farm?  Get out of the business?   That is what the Obama administration wants.  That is what the other(left) hand is doing.  They have been attacking the small family farms right and left. 
    The goal of the PTB is to corporatize and collectivize all agriculture.  Corporations like Monsanto are the epitome of evil with their GMO seed.  And if they have their way they will be the only game on the planet.  No more organic foods.  No more farmers’ markets.  Goodness, schools have even eliminated bake sales.  NY City wants to outlaw Big Gulps.  Government is out of control.   
     

  10. unbelievable

  11. Well, there it is! The ‘starting gun’ has ‘fired off’ and the race to the exits OUGHT to bolt off the line. Of course most of the competitors are deafened by the noise from their TV sets, so only the truly nimble and attentive will ‘win’, the rest will run in confused circles like decapitated chickens until they’re fried up for dinner.

Speak Your Mind