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A trustee representing the creditors of SemGroup Corp. sued Barclays Plc over a $143 million deal to offload the oil and natural gas pipeline company's commodities trading positions the month before it filed for bankruptcy in July 2008, Bloomberg News reported yesterday. SemGroup, which lost $2.4 billion shorting oil as prices rose in 2007 and 2008, emerged from bankruptcy in November 2009, according to a complaint filed on Monday. The trustee, Bettina Whyte, is seeking a return of the $143 million SemGroup paid Barclays to take over its trading book on the New York Mercantile Exchange. She claims that Barclays forced a "huge and unjustified" fee on SemGroup, with no benefit to the company or its creditors.

Bankruptcy Judge James Peck ruled yesterday that a group of more than 20 hedge funds and money managers can't jump ahead of creditors of Lehman Brothers Holdings Inc.'s brokerage arm in the order to be repaid, the Wall Street Journal reported yesterday. Judge Peck said that Lehman's "soft-dollar" arrangements with the money managers don't entitle them to customer status over the brokerage unit's creditors. Soft dollars are credits a brokerage gives to hedge funds and other money managers for using its services, typically for securities research. Because soft-dollar credits cannot be used like cash to buy securities, Judge Peck said, they do not qualify for enhanced customer protection under the law.

A definition of swaps required by the Dodd-Frank Act and approved by U.S. regulators will bring government scrutiny to a $648 trillion global market that has been largely unchecked since it emerged three decades ago, Bloomberg News reported yesterday. The U.S. Commodity Futures Trading Commission (CFTC) and Securities Exchange Commission, the agencies charged with overhauling financial regulation following the 2008 credit crisis, laid out for the first time when interest-rate, credit, commodity and other derivatives will be considered swaps. The designation approved yesterday by the regulators activates rules to increase collateral requirements and bolster public trading of the products by companies such as JPMorgan Chase & Co., Goldman Sachs Group Inc. and Cargill Inc. The swap definition will trigger almost 20 Dodd-Frank measures for reporting, clearing, trading and record-keeping that may take effect as early as September. The CFTC voted 4-1 to complete the roughly 600-page document after the SEC voted unanimously in a private process on July 6.

Iowa-based broker PFGBest collapsed yesterday after regulators accused it of misappropriating customer funds for more than two years, Reuters reported yesterday. The Commodity Futures Trading Commission (CFTC), which along with industry regulators had given a clean bill of health to dozens of brokers following spot checks in January, alleged that the firm's regulated Peregrine Financial Group unit and its owner had defrauded customers and lied to regulators in order to hide a shortfall that now exceeds $200 million. "The whereabouts of the funds is currently unknown," the CFTC said in a complaint against PFG and its founder and chairman, Russell R. Wasendorf Sr., whose suicide attempt on Monday morning outside the firm's Cedar Falls, Iowa, offices appears to have precipitated the crisis. Peregrine filed to liquidate under chapter 7 with between $500 million and $1 billion of assets and between $100 million and $500 million of liabilities. The company listed between 10,000 and 25,000 creditors.

The Securities and Exchange Commission is meeting today to consider adopting a proposal issued three weeks after the stock rout of May 6, 2010, to build a single system to track all order and trading data, Bloomberg News reported yesterday. The consolidated audit trail will enable the reconstruction of market crises and analyze trading on 13 equity exchanges, 10 options markets and more than 200 broker-dealers that execute stock away from public venues. Momentum for the proposal increased after it took the SEC and Commodity Futures Trading Commission five months to complete a report on what became known as the flash crash, in which the Dow Jones Industrial Average briefly plunged 9.2 percent. While the CFTC needed several weeks to compile its data, a 20-person SEC team spent three months collecting, cleaning and processing data from exchanges and brokers because of a lack of uniform quotes and trade data, according to Gregg Berman, senior adviser to the director of the SEC’s division of trading and markets.

The living wills prepared by major financial institutions in compliance with the 2010 Dodd-Frank Act are shockingly incomplete and flawed in one crucial aspect: They neglect to explain how cross- border assets and liabilities would be handled in different legal jurisdictions, according to a Bloomberg News commentary yesterday. The plans should be rejected by officials, according to the commentary, and sent back to the banks to be revised. Ignoring cross-border issues is akin to planting a poison pill in the heart of these living wills, according to the commentary. When the time comes to wind down a failing megabank, the complexities and potentially dangerous domino effects surrounding the failure of a cross-border institution are likely to increase pressure for a bailout that will protect creditors, and perhaps shareholders and executives, too.

The former leaders of failed IndyMac Bancorp, including ex-Chief Executive Michael Perry, have agreed to settle a class-action securities lawsuit stemming from the bank-holding company's collapse four years ago, the Wall Street Journal today. In a settlement outlined in U.S. District Court in Los Angeles, IndyMac's insurers will pay $6.5 million in cash to investors who had sued the company's leaders for securities fraud as the nation's housing bubble collapsed in the spring of 2008. IndyMac shareholders sued Perry and former finance chief Scott Keys in June 2008 over allegations they had misled investors about the failed mortgage lender's deteriorating financial condition. The following month federal bank regulators seized and closed IndyMac's thrift, IndyMac Bank.

While District Judge Robert Wilkins noted that he was "truly sympathetic to the plight" of these victims in the Stanford Ponzi scheme case, he also noted that the plain language of the law does not allow compensation from the Securities Investor Protection Corp. (SIPC), according to a Wall Street Journal commentary today. The SIPC program, which collects insurance premiums from the securities industry, only covers investors in cases when assets disappear from their accounts at participating U.S. brokerages. If assets are still in the accounts but turn out to be worth nothing, SIPC does not cover the loss. If customers decide to take a flier on certificates of deposit issued by a bank in Antigua, as the Stanford victims tragically did, SIPC cannot help them, according to the commentary, just as it does not refund money to investors who buy shares before a company goes bankrupt. The SEC was seeking to force SIPC to assist thousands of victims defrauded by R. Allen Stanford, but was rejected by Judge Wilkins last week.

American International Group Inc., which was taken over by the federal government in 2008, sued the U.S. seeking $30.2 million for an alleged overpayment of taxes for 1991, Bloomberg News reported on Friday. The lawsuit, filed on Thursday in the U.S. Court of Federal Claims in Washington, D.C., notes that the insurance company is attempting to resolve underpayments and overpayments of taxes through 1999. The refund request has been pending before the Internal Revenue Service since 2007, according to the complaint.

The Commodity Futures Trading Commission (CTFC) is set to finalize this week a critical reform that will trigger banks and traders having to comply with costly new derivatives rules, Reuters reported yesterday. The CTFC will vote on Tuesday on a definition of a "swap," which will start a countdown on compliance dates for big swaps players to start registering with regulators and reporting their trades. Market watchers say this is a big step in regulators' efforts to bring the $650 trillion over-the-counter swaps market out of the shadows. Widespread ignorance of swaps exposure at failed investment firm Lehman Brothers and insurer American International Group aggravated the 2007-2009 financial crisis, which led to billions of dollars in taxpayer bailouts.