March 16, 2012

Agriculture Subcommittee
Committee on Appropriations
U.S. House of Representatives
Washington, D.C.

Dear Congressman,
It has come to my attention that Gary Gensler, Chairman of the CFTC, will be appearing before your subcommittee on March 22 to request a substantial increase in the CFTC budget for the coming year. As a MF Global customer and a CTA whose business was adversely affected by the illegal transfer of funds from my segregated account at MF, I would like to express my extreme displeasure with the performance of the CFTC under Mr. Gensler’s leadership. I was also very disappointed to learn that the hearing will not be webcast, and request that arrangements be made for the public to view Mr. Gensler’s testimony.

The demise of MF Global and the looting of $1.6 billion from customer segregated accounts represents the biggest regulatory failure in the history of organized commodity trading, and threatens the integrity and viability of U.S. futures markets. I urge you to examine the following questions with Mr. Gensler during the upcoming hearing:

1. MF was clearly under increasing financial pressure for several weeks prior to filing for bankruptcy, as evidenced by ratings downgrades, loss of primary dealer status with the NY Fed and a plunging share price. Why didn’t the CFTC enhance its monitoring of segregated accounts in the days and weeks prior to bankruptcy, either on its own or via the DSRO (the CME)?

2. When MF filed for bankruptcy on October 31, over 99% of its accounts were commodity accounts. Why did the CFTC allow SIPA to take over the bankruptcy? More importantly, why was MFGH (the holding company) allowed to file a Chapter 11 bankruptcy, enabling the continued transfer and scattering of assets to other MF subsidiaries and MF creditors around the world? The bizarre structuring of these two bankruptcies only favored the interests of MF’s general creditors such as JP Morgan, at the expense of customers. Shouldn’t the CFTC be actively protecting farmers, ranchers and the general commodity trading public, not big banks and general creditors?

3. Why didn’t the CFTC immediately move to freeze all MF Global assets, along with the assets of its senior executives, to facilitate the recovery of funds illegally removed from customer segregated accounts? Who at the CFTC handled the decisions related to the bankruptcy, and what communications/contact did they have with the SEC, SIPC, MF management and MF creditors?

4. You are on record stating that CFTC rules require the segregation of customer funds at all times ("every nanosecond"). The amount missing from customer funds ($1.6 billion) represents over ¼ of the entire balance of customer funds at MF and exceeds the total net worth of MF prior to bankruptcy…..clearly not a simple clerical error. Isn’t this prima facie evidence of a criminal violation of CFTC rules? As such, why hasn’t the CFTC already initiated enforcement actions against MF’s executives and directors?

5. The MF Global affair is arguably the biggest crisis for the CFTC since the agency was created. Since you are unable to participate in the investigation due to your long-standing professional relationship and friendship with Mr. Corzine, wouldn’t it be more prudent (and honorable) for you to tender your resignation from the CFTC?

The CFTC clearly failed in its mission to protect the public interest and ensure the proper functioning of commodity markets. They may even have been complicit in allowing the MF bankruptcy to be structured so as to favor big bank creditors at the expense of customers. At the very least, they were "missing-in-action" at critical steps in this process. If the CFTC is unable or unwilling to carry out its mission, why do we even need a CFTC? Perhaps the money needed to fund this agency would be better spent reimbursing defrauded commodity customers, and/or used to reduce the Federal budget deficit.

Regards,

Stanley P. Haar
Haar Capital Management LLC
7280 W. Palmetto Park Road
Suite 102
Boca Raton, Florida 33433
Tel: 561-750-3131

www.haarcapital.com [27]

Agriculture, Rural Development, Food and Drug Administration, and Related Agencies
Agriculture Subcommittee Members