Report recommends merging or streamlining two financial regulatory agencies

“We conducted this investigation because MF Global customers deserve to know how and why their funds went missing,” subcommittee chairman Randy Neugebauer, R-Texas, said in a statement. “We conducted this investigation because MF Global customers deserve to know how and why their funds went missing,” subcommittee chairman Randy Neugebauer, R-Texas, said in a statement. Pablo Martinez Monsivais/AP

More than two years after passage of the Dodd-Frank financial reform law, House investigators have faulted two key regulatory agencies for poor coordination in monitoring the ill-fated investments of New Jersey-based MF Global, the bankrupt firm once headed by former Democratic Sen. and Gov. Jon Corzine.

The House Financial Services Oversight Subcommittee, in a report released Thursday, said the Securities and Exchange Commission and the Commodity Futures Trading Commission “failed to share critical information about MF Global with one another, leaving each regulator with an incomplete understanding of the company’s financial health."

Decisions by Corzine and his team to invest in certain products in Europe caused a $1.6 billion shortfall in client-owned funds, resulting in the eighth largest bankruptcy in U.S. history. “We conducted this investigation because MF Global customers deserve to know how and why their funds went missing,” subcommittee chairman Randy Neugebauer, R-Texas, said in a statement. “Market participants deserve to know whether regulatory lapses have been identified and will be corrected and taxpayers deserve to know that regulators are being held accountable so similar losses may be prevented from occurring in the future.”

Full committee chairman Spencer Bachus, R-Ala., spoke of a failure by the commissions to live up to the promise of the controversial 2010 financial reform law in executing interagency cooperation. “This, once again raises the question of whether regulators are so preoccupied writing hundreds of new rules that they’re missing the basics like safeguarding customer funds and protecting investors from financial frauds,” he said.

The report recommended “the SEC and the CFTC streamline their operations, or merge into a single financial regulatory agency that would have oversight of the entire capital markets.” The investigation entailed three hearings; more than 50 witness interviews; and review of more than 243,000 documents obtained from MF Global, former employees and federal regulators. It faulted the company for “a lack of internal controls and an atmosphere that Corzine created, in which nobody could challenge his decisions.”

Spokesman John Nester said SEC is reviewing the report and will consider carefully those recommendations within its jurisdiction. “However, with respect to communications between the SEC and the CFTC regarding the capital charges required of the firm in August 2011, the report neglects to note that our staff in fact informed the CFTC staff of these charges at that time, a fact confirmed by CFTC’s general counsel in testimony before the subcommittee,” he said.

CFTC declined to comment.

Stay up-to-date with federal news alerts and analysis — Sign up for GovExec's email newsletters.
Close [ x ] More from GovExec

Thank you for subscribing to newsletters from
We think these reports might interest you:

  • Sponsored by G Suite

    Cross-Agency Teamwork, Anytime and Anywhere

    Dan McCrae, director of IT service delivery division, National Oceanic and Atmospheric Administration (NOAA)

  • Data-Centric Security vs. Database-Level Security

    Database-level encryption had its origins in the 1990s and early 2000s in response to very basic risks which largely revolved around the theft of servers, backup tapes and other physical-layer assets. As noted in Verizon’s 2014, Data Breach Investigations Report (DBIR)1, threats today are far more advanced and dangerous.

  • Sponsored by One Identity

    One Nation Under Guard: Securing User Identities Across State and Local Government

    In 2016, the government can expect even more sophisticated threats on the horizon, making it all the more imperative that agencies enforce proper identity and access management (IAM) practices. In order to better measure the current state of IAM at the state and local level, Government Business Council (GBC) conducted an in-depth research study of state and local employees.

  • Sponsored by Aquilent

    The Next Federal Evolution of Cloud

    This GBC report explains the evolution of cloud computing in federal government, and provides an outlook for the future of the cloud in government IT.

  • Sponsored by LTC Partners, administrators of the Federal Long Term Care Insurance Program

    Approaching the Brink of Federal Retirement

    Approximately 10,000 baby boomers are reaching retirement age per day, and a growing number of federal employees are preparing themselves for the next chapter of their lives. Learn how to tackle the challenges that today's workforce faces in laying the groundwork for a smooth and secure retirement.

  • Sponsored by Hewlett Packard Enterprise

    Cyber Defense 101: Arming the Next Generation of Government Employees

    Read this issue brief to learn about the sector's most potent challenges in the new cyber landscape and how government organizations are building a robust, threat-aware infrastructure

  • Sponsored by Aquilent

    GBC Issue Brief: Cultivating Digital Services in the Federal Landscape

    Read this GBC issue brief to learn more about the current state of digital services in the government, and how key players are pushing enhancements towards a user-centric approach.


When you download a report, your information may be shared with the underwriters of that document.