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NEW YORK, March 20, 2014 (GLOBE NEWSWIRE) -- INTL FCStone Inc. (Nasdaq:INTL) announced today that its subsidiary, FCStone, LLC, was completely successful in its appeal of a January 2013 decision by the U.S. District Court, Northern District of Illinois, in the Sentinel matter. The U.S. Court of Appeals for the Seventh Circuit handed down its reversal yesterday of the trial court's decision.
The appeal court's reversal will have no financial impact on INTL FCStone, which had considered the possibility of losing the appeal to be remote and, accordingly, made no provision in its financial statements for any further loss in this matter. The appeal cash deposit made by FCStone with the court will be refunded.
The trial court's decision, if it had been allowed to stand, would have resulted in a net pre-tax loss to FCStone of between $4 million and $6 million, and could have undermined the integrity of the futures industry's system of segregated customer accounts and the CFTC regulations designed to protect those accounts. The appeal court's reversal of the decision vindicates the commitment of FCStone and the futures industry to protecting customer segregated funds.
The case arises from the 2007 bankruptcy of Sentinel Management Group, Inc. ("Sentinel"), an SEC-registered investment adviser and CFTC-regulated futures commission merchant. Sentinel, in accordance with CFTC regulations, invested customer funds on behalf of FCStone and many other futures commission merchants. Sentinel also invested funds deposited by hedge funds and other securities investors. In August 2007, Sentinel declared bankruptcy. Shortly thereafter, a Chicago federal district court ordered Sentinel to return all remaining customer funds which had been deposited by the futures commission merchants, including FCStone, and Sentinel did so. At that time, FCStone itself covered any account shortfall in order to ensure that its customers suffered no harm due to the insolvency of Sentinel.