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Fund Commingling Not An Accident: Stifel CEO

Wednesday, 2 Nov 2011 | 11:09 AM ET

It's not supposed to happen and certainly isn't encouraged, but MF Global isn't alone in commingling company and customer money.

Sandra Baker | Photographer's Choice | Getty Images

"During the day I think funds are commingled, but at the end of the day you need to segregate customer funds from firm funds," Stifel Financial Chief Executive Ronald Kruszewski told CNBC Wednesday. "You can’t finance your business with customer funds."

Money "is fluid during the day," he added, but "you're not supposed to use it. It is that simple."

A variety of regulators are examining whether MF Global Holdings diverted some $700 million in customer funds to support its own trades when the firm was on the verge of filing for bankruptcy protection. Late Tuesday, the Associated Press quoted an unnamed federal official who said an MF Global official admitted the firm used client funds.

MF Global did not comment on that report, but has said all its missing funds are accounted for.

MF Global's Missing Money
Discussing whether it is possible $700,000 can be lost with lack of proper regulation practices, with Ronald Kruszewski, Stifel Financial chairman/president/CEO, who also weighs in on Greece's debt problems.

Stifel's Kruszewski told CNBC it is always possible the $700 million was commingled because of bad compliance or computer programs.

"It’s supposed to happen daily. It’s supposed to segregate funds daily. I don’t think it accidentally happens," he said. "What can happen is in a meltdown situation, funds can move around in the end."

Kruszewski said he knows Jon Corzine, the head of MF Global, whose bets on European sovereign debt precipitated the bankruptcy, but hasn't spoken to him recently.

Corzine's legacy "certainly isn’t good," the Stifel chief said. "You know, going from chairman of [Goldman Sachs] and the governorship [of New Jersey] to presiding over a failed financial institution certainly is not moving in the right direction."

— The Associated Press contributed to this report.

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