if customer funds are transferred out of the segregated account to be invested by the fcm, the fcm must make a simultaneous transfer of assets into the segregated account. the fcm cannot take money out of the segregated account, in best its, and return it to be segregated cap at some -- invest it, and returned it to the cab ategate to the some time. commissioner regulations require that the customer be provided with a wrist disclosure statement as centers -- risk disclosure statement. notifyo require fcm's to us immediately of instances of significant margin calls. while our current focus is returning as much money as possible to the customer, we are expending an enormous amount of effort to locate the missing customer funds and pursuit the enforcement investigation. all of the information we learned during these aspects of our work will be relevant to the commission as it considers lessons learned and any policy responses for regulatory changes. the commission has a great deal of work ahead to get customer funds back where they need to be, to determine whether to prosecute any violatio

in fcm, i'm sorry, for an entity that would be a a broker-dealer fcm. then those capital levels would be reviewed by either the security side or the future side depending on the higher of the two is what the regulations require. >> to the cftc coordinate with other regulators leading up to mf global bankruptcy. did you consult with finra and the fcc? >> i am not sure exactly if the circumstances of who was consulting with the sec or finra in the days leading up to the bankruptcy. i was not involved at that point. >> would it be, in practice to consult but the fcc? >> i think that there are periodic meetings that regulators have to review issues in the markets, but i am not sure how often that happens. >> thank you. mr. kobak how many accounts were affected? >> our best numbers approximately 36,000. >> how many of those accounts are commodity accounts? >> i'm talking about commodity accounts. about three or 400 active securities accounts on a broker-dealer side of the business. >> how many accounts have been transferred to a different futures commission

>> client dollars that were in the fcm, to my knowledge, were not financed out of the fcm. >> then why did you lobby the cftc against proposed changes to the cftc regulation that would have prevented futures commission from and testing customer funds and obligations and foreign governments? if he never did that, never intended to do that, why did you when you want to put tighter controls on that? >> the meeting that you're referencing, i presume, is the july 20 meeting with mr. gensler. actually of the conference call, was about the percentages that, concentration percentages, actually i was more in support of the cftc's recommendations, that they should be modified a bit but i was more in support of, and it related to the interim repurchase agreements that cftc just ruled on this last monday. >> and if you want the one responsible or had a role in playing about the misappropriation and the loss of this $1.2 billion, somebody is. who would that be? >> the gentleman's time has expired. the witness my answer. >> as i've said repeatedly, we've had people, policy and procedures, and as i h

for instance, if you had treasury bills and did a repo to the fcm from the broker dealer, that would be appropriate. if you did it for euro sovereigns, that wouldn't be. >> okay. and that's a generally accepted practice in the industry, is it not? to -- >> the rule 125, which i think i heard senator harken actually read from, very specific about what can be invested, with segregated funds, and any of the repurchase agreements that could occur between the entities have to be in 125-eligible securities. they can't be in things that didn't already meet that criteria. >> okay. but you knew customer funds were being used for that type of activity. >> for rule 125-eligible. >> yes. you knew customer funds were being used for what you felt was a correct use. >> correct use. >> of investing customer funds. so, were you aware that margin calls were being made on a regular basis just prior to -- towards the middle of the end of october on the sovereign debt investments? >> the sovereign debt investments are in the broker dealer and were not a part of the fcm, and the answer to your question is

recently, a major fcm, mf global, filed for bankruptcy. it goes on to say how my going to get my money back? another one, "i am an attorney in nebraska. i represent the number of people who have commodity-related accounts with mf global." another one says my farm hedging account has been going through mf global. when i heard they were downgraded to junk i asked for my $75,000. i received a check, deposited it, and it was returned. now i have made worthless check, and my account balances short by $75,000. i am sure you have all heard similar said stories. you are aware of what the consequences are for people if they are short on their accounts that they thought were secure, not expecting to have them have any risk other than what market risk they were taking, but they did not expect to have this appearance risk. -- disappearance risk. when your team took over, the company was largely a brokerage term, did not regulate sovereign debt for its own profit, and is not in a manner in which ultimately you did. i guess my first question is why did

the company trash talk fcm released 10,000 balloons in san francisco's yerba buena garden as part ofme of the balloons ended up in the >>> almost a dozen oakland raiders turned out for shop with a jock. and they hit the wal-mart store in san leandro with $100 gift certificates then they all headed out to dinner. >> that's nice. >> mark is here now with sports. wow sharks are running into a little wall there. >> a little bit of a problem but we're all spoiled and there's a long way to go until the play offs. of course the word slump seldom appears in the same sentence with the word sharks. but that's where we are, two wins in the last eight games i guess that qualifies as a skid and that's right where they are. and tonight colorado. and you are thinking here we go again. a late loss by the sharks but get this, with only 22 seconds left in regulation you will see a great play for the sharks to tie it. logan couture great assist to marlowful watch it again. couture drags his toe, gets the pass through to marlow and we have three threes. there was no scoring in overtime. we go to the sho

the company trash talk fcm released 10,000 balloons in san francisco's yerba buena garden as part ofe of the balloons ended up in the bay. they now have 30 days to pay the fine. >>> they call it jocks with hearts. why several players hit the store aisles tonight. >>> almost a dozen oakland raiders turned out for shop with a jock. and they hit the wal-mart store in san leandro with $100 gift certificates then they all headed out to dinner. >> that's nice. >> mark is here now with sports. wow sharks are running into a little wall there. >> a little bit of a problem but we're all spoiled and there's a long way to go until the play offs. of course the word slump seldom appears in the same sentence with the word sharks. but that's where we are, two wins in the last eight games i guess that qualifies as a skid and that's right where they are. and tonight colorado. and you are thinking here we go again. a late loss by the sharks but get this, with only 22 seconds left in regulation you will see a great play for the sharks to tie it. logan couture great assist to marlowful watch it again. co

all fcm investments made with customer funds under regulation 1.25 mostly cap by the fcm and the customeregregated accounts must remain intact at all times. thank you. i would be happy to answer any questions. >> i thank the gentleman. mr. cook. >> chairman nuegebauer, ranking member capuano and members of the subcommittee my name is robert cook and i'm the director from the division of trading and markets at the securities and exchange commission. thank you for the opportunity to testify on behalf of the securities and exchange commission concerning the collapse of mf global. that bank gypsy gypsy of gypsy of the pressure vote segregated accounts of customers have resulted in serious hardship for many mf global customers. regulated to working with the jesse and her fellow regulators to help return customer assets as well as investigate potential investigations of law that made country that you to customer losses. mf global's regulated u.s. subsidiary mf global inc. or msg i was duly registered with the cftc at the futures commission merchant and with the fcc as it broke her dealer. as of

fcm is authorized to invest funds that are in customer segregated accounts. this authorization is found in section four d. of the cea and in commission regulation 1.25. the commission finalized changes to read one red 1.25 just last week. those changes just reinforce the long held view of the commission that sacred funds must be invested in a manner that minimizes their exposure to credit liquidity and market risks to preserve the availability to customers. all regulation 1.25 investment are subject to a general standard which requires that all permitted investment be consistent with the objectives of preserving principle and maintaining liquidity. while our current focus is on returning as much money as possible to customers, we are expending an enormous amount of effort to locate the missing customer funds and pursue the enforcement investigation. all of the information we learned during these aspects of her work will be relevant to the commission as we consider lessons learned and any policy responses or regulatory changes. obviously the commission has a g

response to questions, primary subject of that conversation were between the broker dealer and the fcm. >> three separate meetings, three sprit commissioners that you participated in. did you have separate calls or participation with mr. ginsler when you took the job at mf global to the present time? >> to my recollection, you have my calls, my meetings. >> okay. >> outlined. >> you never once called their cell phone? >> no. >> did you call another member of the administration during this time about any of these issues? >> i'm sorry, congressman, i couldn't hear you. >> did you ever call a member of the administration? you're close to the current administration, as a very generous campaign bund leer, did you -- bundler, did you visit with anyone in the administration about your business at mf global? >> toy -- to my knowledge, i've never spoken about mf global to nip in the administration. >> anyone at the federal reserve? >> i visited with people at the federal reserve as i reported with respect to dealer as i testified to the primary dealer relationship always with staff and staff an

because the experience of that individual had been more on the commodity side of the business or the fcm customer credit area, a concern not only of myself, but of the board, and we wanted to look for someone and did a search, a personnel search, to try to find someone who could bring the kind of experience -- >> if you change a business model to any extent, doesn't it require more than just a risk officer? i mean, do you put procedures in place yourself? did you have any frame, reverence to yourself as what you wanted to be done? >> we had to have different compliance supervision, expanded the positions, and we actually had some serious concerns -- >> tell me how many. >> well, clearly had concerns in asia. >> not concerns, but you said you brought new personnel on i think you said. >> brought new personnel to bear on our compliance functions. >> is that hiring new people? >> new people. >> do you have the idea of how many? >> i will have trouble giving you the exact statistics because it was numbers and, as i said in my oral remark, there were dozens and dozens of people dedicated to t