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Direct Loss Requirement in Fidelity Insurance Bonds
December 29, 2014
On the evening of Feb. 26, 2008, a commodities broker affiliated with MF Global’s Memphis office began trading commodities futures on the Chicago Mercantile Exchange (CME) from his personal trading account using MF Global’s electronic trading system. The broker entered into a large number of sell contracts for May wheat, far exceeding his authorized margin credit. When trading opened again in the morning, the final loss on the transactions was in excess of $141 million. Under the rules of the CME, as a clearing member, MF Global was legally obligated to cover the loss. MF Global transferred sufficient funds from its settlement bank to the CME Clearing House to cover the loss and then recorded a $141 million loss on its books as a bad debt. MF Global submitted a claim to its insurers to recover the loss under the terms of its fidelity insurance bond. The primary and excess insurers denied coverage and ultimately commenced a lawsuit against MF Global seeking an order confirming their disclaimer position. In this article, SRZ partner Howard B. Epstein and special counsel Theodore A. Keyes examine the MF Global case and discuss the direct loss requirements in fidelity insurance bonds.
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The US Securities and Exchange Commission (“SEC”) and the Commodity Futures Trading Commission (“CFTC”) have overhauled Form PF and private fund managers have until March 12, 2025, to begin reporting on the new Form. The changes to the reporting requirements mandated by the amendments to the Form (“Form PF Amendments”) will require substantial preparation by many managers.[1]
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Alerts
The US Securities and Exchange Commission (“SEC”) and the Commodity Futures Trading Commission (“CFTC”) have overhauled Form PF and private fund managers have until March 12, 2025, to begin reporting on the new Form. The changes to the reporting requirements mandated by the amendments to the Form (“Form PF Amendments”) will require substantial preparation by many managers.[1]
Alerts
On March 1, 2024, New York Governor Kathy Hochul signed into law an amended version of the New York LLC Transparency Act (“NYLTA”),[1] requiring certain limited liability companies (“LLCs”) formed or authorized to do business in New York (each, a “NY Reporting Company”) to file a beneficial ownership information (“BOI”) report with the NY Department of State (“NY DOS”). Each NY Reporting Company will be required to disclose on its BOI report identifying information pertaining to each individual who directly or indirectly exercises substantial control or owns or controls 25 percent or more of the ownership interests of a NY Reporting Company (each, a “Beneficial Owner”) and the individuals involved in the NY Reporting Company’s formation or registration to do business in New York (each, an “Applicant”). Information reported to NY DOS will be maintained in a private database not accessible to the public. The NYLTA goes into effect on Jan. 1, 2026 and requires the NY DOS to promulgate regulations implementing the legislation.
Alerts
The US Securities and Exchange Commission (“SEC”) and the Commodity Futures Trading Commission (“CFTC”) have overhauled Form PF and private fund managers have until March 12, 2025, to begin reporting on the new Form. The changes to the reporting requirements mandated by the amendments to the Form (“Form PF Amendments”) will require substantial preparation by many managers.[1]