U.S. Senator Amy Klobuchar today called on market regulators to crack down on bad actors who put consumers' money at risk. At a Senate Agriculture Committee hearing, Klobuchar highlighted the case of a Minnesotan who was a victim of both the Peregrine Financial and MF Global scandals. Klobuchar said that after these recent scandals the Commodities and Futures Trading Commission (CFTC), the Securities and Exchange Commission (SEC), and other financial regulators need to do more to stop financial fraud before it occurs so that farmers and small businesses in Minnesota and across the country can be able to trust the financial system.
"Farmers and small businesses in Minnesota and across the country need to know that the establishments they entrust their money with are playing by the rules," Klobuchar said."Market regulators need to do more to crack down on the bad actors in the financial system and stop fraud before it wreaks havoc on people's lives."
Last week it was discovered that Peregrine Financial Group's owner, Russell Wasendorf, had defrauded his customers out of over $200 million of their funds. Regulators found that Peregrine had only $5.1 million held in customer segregated accounts, while it was reporting it had over $220 million. Segregation of customer accounts is the cornerstone of customer protection in the commodity futures and options markets, and where problems occurred less than 9 months ago at MF Global.
During the hearing, Klobuchar read from a letter that a Minnesotan who was the victim of both the Peregrine and MF Global scandals had written to the National Futures Association, the entity responsible for regulating Peregrine and other similar companies:
"The problem with your statement is the implication that failure to detect a $200 million dollar fraud earlier shouldn't count against you -- it just matters that you catch it. I couldn't disagree more,"the letter said. "Your job is to prevent fraud by putting in place the tools and people to ensure that funds are as reported, that segregated balances are protected, and that people making investment decisions can rely on the audits you perform."
Klobuchar is a member of the Senate Agriculture Committee and has been a leader in the effort to stop financial fraud and abuse. Klobuchar recently successfully pressed finance watchdogs to pass a key rule reform to close loopholes in the financial system to help prevent Wall Street from gambling with customers' money. Klobuchar has pushed for answers on what happened to Minnesota farmers' and ranchers' funds that were lost during the MF Global scandal. She invited Dean Tofteland, a Minnesota farmer affected by the MF Global failure, to testify at a hearing in December. The Senate Agriculture Committee will hold a follow up hearing on MF Global and bringing more accountability to the futures market on August 1st.