--Customers of PFGBest saw trades held with the firm liquidated
by Jefferies
--Jefferies liquidated a "substantial portion" of those
positions; to liquidate remainder in "a fair and reasonable
manner"
--Jefferies doesn't expect to incur "any loss in respect of
PFG"
(Adds information on customers' access to cash, CFTC lawsuit,
beginning in first paragraph.)
By Jacob Bunge and Brett Philbin
Customers of embattled futures and currency brokerage PFGBest
saw trades held with the firm liquidated Tuesday, though their
assets remained out of reach.
All open trading positions held by clients of PFGBest were to be
liquidated by Jefferies Group Inc. (JEF), which clears transactions
for the struggling company, customers were told in a notice early
Tuesday, a copy of which was reviewed by Dow Jones Newswires.
Clients that traded through PFGBest said they were unable to
access their cash after their positions were sold, however, as
funds were frozen while regulators looked into an apparent
shortfall in customer assets held with the firm.
Jefferies confirmed in a statement that it had "liquidated a
substantial portion of those positions and expects to be able to
expeditiously liquidate the remainder in a fair and reasonable
manner," adding "after which all proceeds of the liquidation will
be maintained in segregated accounts."
Jefferies said it began closing out the positions after PFG was
unable to meet a margin call that the investment bank made in
response to an action by the National Futures Association, the
futures industry's self-regulatory body.
Jefferies, which had trading positions held on behalf of PFG's
clients secured by cash held in margin accounts, said it doesn't
expect to incur "any loss in respect of PFG."
Shares of Jefferies dropped 1.6% to $12.43 following the
company's confirmation of the clearing relationship with Peregrine
Financial Group Inc., PFGBest's parent company. A spokeswoman for
CME Group Inc. (CME) confirmed that Jefferies remained "in good
standing" as a member of CME's clearinghouse.
A spokeswoman for PFGBest did not respond to requests for
comment Tuesday.
Late Monday, PFGBest's brokerage and retail customers had their
accounts frozen as regulators began looking into the company's
books, following what PFGBest described to clients as a "suicide
attempt" by founder and Chief Executive Russell Wasendorf, Sr. at
the company's Cedar Falls, Iowa, offices.
In June, the company reported to the Commodity Futures Trading
Commission that it held approximately $400 million in customer
assets.
On Tuesday, the CFTC sued PFG and Wasendorf, alleging violations
of rules set up to protect customer funds and false statements made
to regulators. Shortfalls in customer funds held by PFG dated back
to at least February 2010, according to the CFTC, and a July audit
revealed about $215 million in missing customer money.
Write to Jacob Bunge at jacob.bunge@dowjones.com