Are You Sleeping? Are You Sleeping, MAS?

Mr Bob Yap, a liquidator for MF Global Singapore made an interesting reply in the forum page in the Straits Times on Friday regarding a query posed by a former client of MF Global Singapore. To wit: "We were told that our funds were kept in Singapore in segregated accounts, so why is my money in Australia?"

Apparently, for clients trading in CFDs (Contracts for Difference), such funds for their margin accounts were supposed to be kept in Australia where the counter party for such trades is based. This brings up many questions.

1. Is the client in question, Mr Vernon Khoo trading in CFDs?
2. If so, why isn't Mr Vernon Khoo aware of this? Another case of mis-selling like in the Lehman case?
3. What about clients who trade more than CFDs? How does MF Global decide how to apportion their client's margin funds to be kept separately in Singapore and Australia?
4. Are segregated client funds in Australia treated any differently from those in Singapore?

With regards to question (4), if the protection afforded to client segregated funds in Australia is less than that afforded to their funds in Singapore, then it represents a loophole in the protection a client might reasonably expect to have. Is MAS aware of this?

In any case, the creditors of MF Global, whether in Singapore or Australia do not have any rights to client funds. They may only recover any outstanding debt from MF Global's OWN assets. So it is surprising that it is taking such a long time to resolve. Who is paying for the services of liquidators like Mr Bob Yap?

More importantly, in this whole saga, MAS has not come out to clarify the terms of segregated client funds. Is MF Global the ONLY company that has been making free with its clients funds? What about the other investment/finance/brokerage companies? Is MAS cracking down on them to ensure that what happened to MF Global's clients do not happen to clients of other such firms?

I think the can of worms is so BIG that MAS doesn't know how to handle it. Such financial chicanery/shenanigans is so deeply embedded in the fabric of how these financial firms do business that if MAS were to crack down on it, our vaunted status as a significant player in the field will wither as all the major players will leave.

We've used the lure of our CPF funds to kick start our financial industry. Unfortunately for Singaporeans, when Mr Goh Chok Tong promised a Swiss standard of living for us, he didn't clarify that it was only for the bankers. When it comes down to it, (so far at least), MAS appears to prefer to let Singaporean investors be screwed rather than to do the right thing.