U.S. regulators are launching a broad review into the business practices of failed futures brokerage MF Global Holdings Ltd as their hunt continues for over $600 million in missing customer money.

Round-the-clock shifts for examiners have become the norm as they sort through the collapse of the firm headed by former New Jersey Governor Jon Corzine. MF Global filed for bankruptcy on Monday after risky bets on European debt scared away clients and investors.

We will look at every aspect of how the firm conducted business, Mary Schapiro, chairman of the U.S. Securities and Exchange Commission, told Reuters regarding the agency's review. She declined to discuss any potential action that the SEC's enforcement division may take.

Corzine had hired leading white-collar defense lawyer Andrew Levander of Dechert LLP to represent him in cases that might stem from the bankruptcy filing, a legal source briefed on the matter said.

Levander has represented outside directors of Lehman Brothers Holdings Inc and former Merrill Lynch CEO John Thain, among others. Corzine's lawyer in the bankruptcy case is Schuyler Carroll of Perkins Coie LLP. Carroll declined to comment.

A spokeswoman for MF Global and Corzine could not immediately be reached for comment.

Investor fears over European sovereign debt risks facing other investment houses hit shares of Jefferies Group Inc hard early on Thursday until it issued a statement saying it had no meaningful net exposure.

In other developments, the president of a congressionally chartered investor protection group said there were some problems finding firms to take over some former MF Global customer accounts because of questions about missing money.

Both SEC's Schapiro and Gary Gensler, chairman of the Commodity Futures Trading Commission, painted a picture on Thursday of close teamwork between regulators to get to the bottom of why the firm collapsed and track down the funds.

Gensler said CFTC staff has been on-site at the firm since last Thursday, and took part in calls in the middle of the night with other regulators about the fate of the firm.

The first time that we actually knew there was a shortfall for me was when I got woken up 2:30 a.m. Monday, Gensler told reporters after testifying to the Senate's Permanent Subcommittee on Investigations on Thursday.

So far, the long hours have failed to turn up much in terms of money -- and that may not be an accident. CME Group, the biggest U.S. futures exchange operator, has said that MF Global appeared to have made transfers of customer segregated funds in a manner that may have been designed to avoid detection.

The most troubling aspect about the MF Global situation is the shortfall of customer money at the firm, Gensler said, adding that customer money may be tied up for a while as the bankruptcy court and trustee do a full accounting.

The CFTC, which oversees the futures markets, is the regulator working to track down the hundreds of millions of dollars missing from customer's futures accounts, which make up the lion's share of the shortfall at the bankrupt brokerage.

For now, regulators have many questions still to be answered.

It's extremely troubling the kinds of risks that were taken, Schapiro told Reuters. We don't know yet what holes exist, whether they can or will be filled, and until we know that, we can't really do the post-mortem.


Brokerages like MF Global are required to keep their customers' money segregated from the firms' own cash. Questions about whether this took place at MF Global have attracted the Federal Bureau of Investigation in addition to regulators.

Neither MF Global nor Chief Executive Jon Corzine, who once ran Goldman Sachs, have been accused of any wrongdoing.

Segregation of customer funds is the core foundation of customer protection in the commodity futures and swaps markets, said Gensler on Capitol Hill. Segregation must be maintained at all times. That means at every moment of every day.

As customers of MF Global clamor to gain access to their frozen trading accounts, bankruptcy liquidators are having difficulty finding rival brokers willing to accept a court-approved transfer of these accounts, a top liquidator told Reuters on Thursday.

The most elemental question is finding a home for these accounts, but given the fact questions (remain about the cash shortfall), it's proving to be a challenge, said Stephen Harbeck, president of Securities Investor Protection Corp, a group that recovers assets from failed brokerage firms.

In the 2008 bankruptcy of Lehman Brothers it took liquidators seven to ten days to begin reuniting retail customers with their accounts, Harbeck said.

Gensler made clear U.S. taxpayer money was not at risk in the MF Global meltdown. This was an example, actually, of a financial institution having the freedom to fail, he said. (Reporting by Sarah N. Lynch, Christopher Doering, Philip Shishkin in Washington DC, Writing by Edward Tobin; Editing by Tim Dobbyn and Muralikumar Anantharaman)