Activists in MF Global case refuse to be ignored | Crain’s Chicago Business
This article originally appeared in the November 13, 2012 edition of Crain’s Chicago Business.
By: Lynne Marek
Two Chicago futures trading advisers who were instrumental in helping MF Global Inc. customers recover money from the collapsed firm are seeking election to the board of an industry regulator, even though a nominating committee bypassed them.
James Koutoulas and John Roe organized the Chicago-based Commodity Customer Coalition after MF Global’s failure and helped press MF Global customer claims both in New York bankruptcy court and on Capitol Hill. Mr. Koutoulas brushed off his law degree for the effort and Mr. Roe tapped the network of his father, Phil Roe, a Republican congressman from Tennessee.
After the two were notified that the nominating committee for the regulator, the National Futures Association, declined to submit their names for inclusion on the January ballot, they collected more than the required 50 signatures from other traders over the weekend to petition to have their names included on the ballot, Mr. Koutoulas said.
Like other futures-trading customers who saw their MF Global accounts frozen and assets pared in the wake of the firm’s decline, Mr. Koutoulas and Mr. Roe have argued that the funds were legally required to be held in segregated accounts and every penny should be returned. They contend that regulators must step up enforcement to restore market participants’ faith in the system.
“I want to be in this business in 50 years and for that to happen, people have to actually trust the system,” said Mr. Koutoulas, CEO of Chicago-based Typhon Capital Management LLC. “They have to actually be safe, not just feel safe.”
The Chicago-based NFA is a self-regulatory organization that was created by the Commodity Futures Trading Commission in 1982 to help police the futures industry. Its board is made up mainly of industry representatives; it is funded by the industry through registration dues and fees.
There are 11 of 27 NFA board seats open for the election, with votes due in January. Mr. Roe and Mr. Koutoulas are seeking two of the four seats reserved for commodity trading advisers and commodity pool operators.
The NFA and Chicago-based CME Group Inc., which operates the world’s largest futures exchange, are both part of the self-regulatory system tasked with overseeing traders, brokers, futures commission merchants and other market participants.
While CME was the frontline overseer for MF Global, NFA was responsible for monitoring Peregrine Financial Group Inc., another futures merchant commission that failed this year after its CEO allegedly stole money from customer funds.
NFA CEO Dan Roth has said that the Peregrine fraud came to light as the regulator was improving oversight through new requirements to electronically track the holding of customer funds. The association also has increased financial disclosures from futures commission merchants on its site to give market participants more information about how the FCMs handle their customers’ funds.
Mr. Koutoulas and Mr. Roe, co-founder of BTR Trading Group in Chicago, will run against two candidates put forward by the nominating committee: George Crapple, co-CEO of Greenwich, Conn.-based Millburn Ridgefield Corp., who is currently on the board, and Tom Lloyd, general counsel at Baltimore-based Campbell & Co.
Patricia Gillman, an attorney at Winton Capital Ltd. in Chicago who serves on the three-member nominating committee for this category, said it was NFA policy not to discuss the committee’s deliberations.
“The nominating committee always has a good number of people to choose from,” said Mr. Roth, noting that the nominating committees in each category typically consider about five to 10 candidates.