MF Global's bankruptcy filing and now funds missing from numerous commodities traders accounts raises the issue of insurance coverage under SIPC, the federal agency that insures brokerage accounts.In answer to the question, are the MF Global accounts insured under SIPC, apparently some of them are. A website has been established to keep claimants up to date and advise how to file a claim--http://dm.epiq11.com/MFG/Project/default.aspxThe site includes the following-- "Advances from the Securities Investor Protection Corp. (SIPC) reserve fund are available to satisfy the remaining claims of each customer up to a maximum of $500,000. This figure includes a maximum of $100,000 on claims for cash."
Regardless of whether some accounts were covered, many of the assets in those accounts are likely not covered. Even in a covered account, commodities are not insured. Clients will still be insured for their cash though.
Hi Hawkin. You probably know better than I do. But I have the impression that investors rarely own commodities. Instead they invest in futures contracts, ie contracts to buy specified commodities at a given price some time in the future.Although commodities may not be covered, what about the futures contracts? If missing from the account are they covered?I suppose gold and related precious metals might be an exception, but even then I would suspect the gold is in a vault somewhere and an MF Global account merely holds a receipt for gold in storage.
Futures contract are commodities as far as the rules are concerned:http://www.sipc.org/how/covers.cfm"Among the investments that are ineligible for SIPC protection are commodity futures contracts (unless defined as customer property under the Securities Investor Protection Act) and currency, as well as investment contracts (such as limited partnerships) and fixed annuity contracts that are not registered with the U.S. Securities and Exchange Commission under the Securities Act of 1933."
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