Andrew Abraham

andy-0101 My name in Andrew Abraham. I have been investing in commodities and managed futures since 1994. I adhere to the philosophy of trend following. Trend following stresses a disciplined approach to commodity/ futures trading. Successful trend following and commodity futures investing requires patience, discipline and actively managing the risk. What sets me apart from other traders is that I am not only concerned about the return on investment but how much risk I will have to tolerate to achieve my goals.

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If you are interested in contacting for speaking engagements. Please email me at Andrabr9@gmail.com or call 954 903 0638.

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Futures and commodity trading involve substantial risk. The evaluations of futures and commodities may fluctuate and as a result, clients may lose more than their original investment. In no event should the content of this website be construed as an express or an implied promise, guarantee or implication by, that you will profit, or that losses can or will be limited in any manner whatsoever. Past results are no indication of future performance. Information provided on this website is intended solely for informative purposes and is obtained from sources believed to be reliable. Information is in no way guaranteed. No guarantee of any kind is implied or possible, where projections of future conditions are attempted.

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What is the oversight of Trustee Giddens of MF Global?

A great article from MFG Facts regarding the oversight of Trustee Giddens of the MF Global mess…

he SEC Office of Inspector General published a damning audit of the Securities Investor Protection (SIPC) Activities just this past March. Yet most everything in it appears to have been ignored. Prominent among the ongoing grave accountability problems inside SIPC are that Trustee Fees are excessive, with practically no oversight and absolutely no recourse.
From the report:
Liquidations are similar to ordinary bankruptcy cases, it does not provide any limit on the amount of trustee fees in SIPA liquidations, unlike bankruptcy cases. Second, under SIPA, where payments are made out of the SIPC fund, courts have no discretion whatsoever to limit fees that SIPC has recommended for trustees or their counsel. Thus, even if a court finds the amount of fees awarded to the trustee to be excessive, it is required to approve such excessive fees if SIPC determines that the fees are reasonable. We found that in one case, a Southern District of New York bankruptcy judge deemed fees to be awarded to the trustee in a liquidation to be excessive, but found that he had no choice but to approve the fees.
Fees around the LBI liquidation are among those singled out as excessive, regardless the SIPC hired the same trustee for the MF Global, Inc liquidation.
According to the latest published report, the fees paid to the trustee and his counsels processing the Lehman claims for the period from September 2008 to September 2010 (24 months) totaled approximately $108 million. According to the fourth interim fee application, as of September 30, 2010, the entire administrative fees, including fees for accountants, consultants, etc., totaled approximately $420 million.
We hadn’t see anything yet. October 24th Bloomberg reported that LBH had spent “642 million on its liquidation, with most of the money going for professional and consulting fees. Trustee James Giddens and his law firm, Hughes Hubbard & Reed LLP, have earned about $169 million.”
No reviews of fees and a weak warning
An entire section of the OIG report is dedicated to the problem that “The SEC Does Not Review Fees SIPC Pays to Court-Appointed Trustees on a Periodicor Systematic Basis”
Remember, this is a government sponsored corporation, and in a time of the exploding bankruptcies in the financial sector we discover that there have been no reviews of fees paid to trustees since 2003 — almost a decade.
Disparagingly, the report continues that Unlike Chapter 7 or 11 bankruptcies “with respect to SIPA liquidations, there is no equivalent provision capping fees and, thus, there is no statutory limit on the amount of fees a trustee can earn in a SIPA case.”
This must be repeated: “no statutory limit on the amount of fees a trustee can earn in a SIPA case.”
So the the report is obliged to make a number of recommendations to try and deal with excessive fees by Trustees. But right now, even if SIPC complains (would they ever dare?) or seeks recourse on extreme fees, there is simply nothing a judge can do about it under current SIPC regulations
And with that, the audit report concludes with a weak warning that Congress might be called upon to get abusive conditions under control
“The Division of Trading and Markets, in consultation with the Commission, shall determine whether to request that Congress modify the Securities Investor Protection Act (SIPA) to allow bankruptcy judges who preside over SIPA liquidations to assess the reasonableness of administrative fees in cases where administrative fees are paid by the Securities Investor Protection Corporation.”
No Shame
If this is not bleak enough, note that the trustee for both Lehman Brothers and MF Global, Inc. has been also the SIPC “house lawyer” for decades. The SIPC is a private corporation and can hire whoever it wants. A private corporation, albeit with a government charter and vast public responsibility. The glaring conflicts for a corporation with this degree of accountability to the public, is beyond the pale by any standard of “good governance.” Gidden’s own public profile reports, “He has been involved with SIPC from the time of its creation in 1970, served as counsel to SIPC in a variety of matters and has served as Trustee or principal counsel in seven major SIPC liquidations, He has also served as a special funds administrator appointed by the Securities and Exchange Commission.” Giddens is a is a member of the SIPC Modernization Task Force. (Which means he is on the committee charged with things like updating the making of recommendations to Congress on any modifications to the Securities Investor Protection Act (SIPA) to fix things like lack of recourse due to excessive fees!)
Just as example of how a trustee get named by SIPC for the LBI liquidation two days before LBI filed for bankruptcy on on September 15th, 2008. The SIPC had already decided who would be hired. In a September 13th letter from Stephen Harbeck, head of SIPC tells the board “The situation is both very fluid and very “non-public”. Should it become necessary to take action, Jim Giddens of Hughes Hubbard and Reed will serve as trustee and counsel.”
There is no shame. In March we have a government report on lack of controls, accountability and the problems of Trustees gone wild. And on October 31st, obviously ignoring the implications of the published audit, the SIPC hands over yet another liquidation to their main man, likely in the same manner of the LBI assignment. MFG Facts and others continue to ask how is it that the CFTC abdicated their congressional mandate and pushed a Futures Commission Merchant into the jaws of SIPC who then with no competition, no regard of the recent OIG audit, and obviously no debate, immediately handed it to James W. Giddens of the firm Hughes Hubbard & Reed?
Today Bart Chilton of the CFTC called for an insurance scheme just like SIPC for the futures industry.


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