Some early moves didn't seem to make sense, but it would take weeks before critical questions began to be asked. For example, why was the firm's subsidiary, MF Global Inc., practically a 100% FCM, put into protection under SIPC, which is designed for the securities industry? With only 318 securities accounts, how could the chairman of SIPC, Stephen Harbeck, possibly characterize MF's securities business as "substantial" to a federal court?

But more importantly, with approximately $5.5 billion in segregated customer assets and an identified $633 million (at the time) shortfall in customer funds, how could MF Global Holdings, a self-identified brokerage firm with the bulk of all earnings from its brokerage unit, rush into a Chapter 11 reorganization and not Chapter 7, which is required for liquidation of brokers? 


Criminal negligence and bankruptcies happen all the time, but with so much customer property gone while regulators literally were on-site, this event was a massive regulatory failure. This bankruptcy structure not only positioned creditors and MF Global executives with the best possible stance, but also allowed regulators to take a backseat to the bankruptcy proceedings and point fingers of responsibility at each other. 

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