By now, most people have heard about the trustee’s motion yesterday for a distribution. There’s been a lot of confusion and a lot of questions about what different elements mean, and while we had been anticipating further clarification from the trustee’s office, that’s not looking likely, so let us explain what we know so far.

For starters, let’s look at the account classes in question. As the motion indicated, clients in 4d accounts will be receiving 30% of their funds, and clients with 30.7 accounts will be receiving 40% of the funds. What’s the difference between the two? In the beginning, a 4d account referred to funds that were being traded on a domestic exchange exclusively, like ICE or the CME, and held in a U.S. bank. When the trading took place on a foreign exchange, like the Eurex, or was being held in a foreign currency, the funds were held in a 30.7 account, which is considered secured. It is primarily a function of accounting.

Why the difference in the distributions based on account class? It has to do with the amount of funds that have been verified to date. As documents released by the trustee’s office reveal, it appears as though all of the 30.7 funds are currently accounted for,  which is good news, and likely the reason these clients will receive a larger portion of their funds. Part is still being held back to insure against glitches in the verification process, as the trustee seems to believe that there may be individual accounts which were used to facilitate the fraud committed by Wasendorf. The shortfall, it appears, is primarily in the 4d funds, which is probably why their distribution amount will be slightly smaller. If you’re a managed futures client, odds are that at least a portion your funds are considered 30.7 funds, which means you will get 40% of some of your money, and 30% of the rest. How much goes where will have to evaluated on an account-by-account basis. If you’re an Attain client, don’t worry – we’re on it.

There are some other issues that need to be addressed, though. For starters, the motion has indicated that there will be two waves of distribution, with the distinguishing factor being account size. The reasoning being provided is that the trustee still needs to verify the larger accounts. This is where  we get frustrated. What have you been doing for the past two months? What has the NFA been doing to help? Why didn’t they send in an army of their auditors to do this verification so that the customers would not end up footing the bill to confirm their own money?

We already have all the verification documentation for our clients compiled, and we have offered our assistance to the staff working under the trustee on multiple occasions. This delay is entirely unnecessary, and unfair to our clients. Our clients are invested in managed futures – an asset class for sophisticated investors which is used to help diversify a portfolio and fortify it against periods of volatility. Since the PFGBest bankruptcy, those investments are sitting idle. We are currently headed toward a great deal of potential volatility in the markets, with more questions than answers on the horizon. What will tomorrow’s job report say? Will there be more stimulus from the Fed? Who will win the election? Will we avoid the fiscal cliff? The uncertainty that dogs these sorts of questions is exactly why our clients make allocations to managed futures, and with every day the trustee delays the distribution, their investment portfolios are missing that crucial diversification. We don’t think they should miss out on one more day of diversification because the trustee won’t take help.

Beyond that, the motion has indicated there will be a bidding process among FCMs for the PFGBest business. We understand why the trustee thought it was a good idea – any money that can be used to help make clients whole is appreciated. The only problem is that no FCM in their right mind would make a bid. Attain was one of PFGBest’s largest clients, and we’ve been on the phone with the others in that category all day. Each of the firms in question has already identified the firms they will be working with once the funds are released. Any FCM that makes a successful bid would, in essence, be paying for business that would be immediately transferred out. This whole bidding process is a futile endeavor, and an unnecessary delay in the bulk transfer of funds. Further, many accounts have already submitted transfer instructions to the FCM of their choice, and doing a bulk transfer elsewhere would be in conflict with the wishes of these customers.

Are we happy there’s going to be a distribution? Of course. Do we think this process has been bungled by the trustee? Absolutely. Can we speed things up? If the trustee will FINALLY accept some assistance from the larger players involved – without a doubt.