With MF Global Case Growing, Agency Expands Enforcement

The Commodity Futures Trading Commission is setting up specialized enforcement units to expose financial wrongdoing, the agency’s enforcement chief said on Monday, an act that coincides with the agency taking a leading role in the investigation of MF Global.

David Meister, the agency’s enforcement chief, said he was creating two enforcement squads, one that will examine fraud and manipulation, and the other to take aim at wrongdoing in the swaps market, a $600 trillion industry at the center of the 2008 financial meltdown.

The move is part of a broader push to revamp the agency’s once-quiet enforcement unit. Under Mr. Meister, a former federal prosecutor and once a partner at the law firm Skadden, Arps, Meagher & Flom, the agency brought 99 enforcement actions over the last fiscal year, 74 percent more than the prior year.

Unlike the “cousin who comes at the holidays,” Mr. Meister said at a Practising Law Institute event in New York on Monday, “We’re here to stay.”

In recent weeks, Mr. Meister’s team has been consumed with MF Global, the commodities and derivatives brokerage firm once run by Jon S. Corzine. When MF Global collapsed into bankruptcy last month, the firm told regulators that it could not locate $600 million in customer money. On Monday, the court-appointed trustee overseeing the liquidation of MF Global estimated that the shortfall could now exceed $1.2 billion.

In MF Global’s final days, the firm improperly diverted the customer cash for its own use, a move that regulators suspect may have caused the money to go missing, according to people briefed on the investigation. Regulators suspect that MF Global used at least some of the money to cover investment losses, which means the money could be gone forever.

Wherever the money went, MF Global violated basic commodities laws that require firms to keep their customers’ money separate from the firm’s.

“You should know the commission takes the laws on segregated funds very seriously,” Mr. Meister said.

If federal prosecutors determine that MF Global intentionally tapped the customer money, they could file criminal charges. But Mr. Meister noted that his agency did not need to show “intent to prove a violation of our law.”

The agency’s renewed enforcement crackdown could still meet serious obstacles. Lawmakers are looking to keep the agency’s budget essentially flat, despite it’s heightened authority and responsibility.

Limited resources are also constraining the Securities and Exchange Commission.

“We’re essentially engaged in a triage exercise,” George Canellos, the head of the S.E.C.’s New York office, said at the Practising Law Institute event, which was geared to hedge fund enforcement issues. While Congress promised to deliver new resources to regulators following the financial crisis, “so far that’s been a false promise,” he added.