In Light of MF Global: Knowing the Risks of European Investment

It has been difficult to not hear about the recent events surrounding MF Global Holdings Ltd and former Senator and New Jersey Governor, John Corzine. However, many investors do not really understand what happened or why. A recent article in Forbes Online titled “MF Global: Were the Risks Clear?” helps to break down just how these events transpired. The article details how overexposure to European sovereign debt (government bonds) leveraged by using borrowed money (called “margin”) coupled with declines in the value of those bonds caused the downfall of the fund.
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The almost overnight collapse of such a prominent and public investment fund as MF Global has brought many issues to light, and the Forbes article characterizes this “as the latest reminder to investors that it’s important – and sometimes very difficult – to understand the entire spectrum of risk they’re exposed to.” These events also raise many questions that should be asked by investors, such as “Do I really understand how my advisor is managing my savings?” and “Have the risks in my portfolio been adequately explained to me?”.

Many investors in MF Global have said that they did not understand what their money was being invested into, but rather trusted that the firm would do the right thing by them. One investor cited by the article said on his blog that “I am supposed to know the difference between an ethical operator and one that is not. The truth is that it often is very difficult to tell them apart.” This has unfortunately come to be a fairly common sentiment by many individual investors, in reference to their personal broker and the funds they invested in.

In the present day, individual investors as well as large institutions and investment funds can all be equally at risk of the volatility in the European markets, like MF Global was. Investments directly in European bonds and others with exposure to the European markets may not be appropriate for conservative investors, including senior citizens and retirees, especially if these investments were made on margin. Individuals with these investments may have already lost or may be at risk of losing large portions or possibly all of their investments.

It is the right of any and all investors who believe they may have suffered losses to contact our offices to explore their legal rights and options. If you or a family member suffered losses in unsuitable or risky investments, such as those in European debt, contact the securities fraud lawyers at Malecki Law for a free consultation and case evaluation.