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A woman leaves the office complex where MF Global Holdings Ltd have an office on 52nd Street in midtown Manhattan October 29, 2011.ANDREW KELLY/Reuters

The latest twist in the MF Global bankruptcy saga has Canadian clients wondering who has their money, after a U.S. regulator inadvertently transferred Canadian accounts out of the failed U.S. parent company and into a U.S. derivatives clearing house.

CME Group Inc., the U.S. derivatives market operator and industry self-regulatory body, said Monday that it had returned MF Global's Canadian client accounts to commodity and currency brokerage house MF Global Canada Co. – after admitting Sunday that it had accidentally transferred the accounts to U.S. clearing firm Vision Financial Markets LLC, without the knowledge or consent of Canadian authorities. The Canadian accounts got lumped in with U.S. clients' accounts that were transferred en masse out of MF Global Holdings Ltd. , the U.S. parent company, as U.S. regulators attempted to free up investor holdings that have been essentially frozen since MF Global slipped into bankruptcy on Oct. 31.

But with Canadian officials unable to confirm late Monday whether the client money is in the hands of either MF Global Canada or its Canadian trustee in bankruptcy, KPMG, the firm's Canadian clients remain in the dark about where their money actually is, whether it's safe, and when they'll be able to get access to it.

"They've told me nothing," said one client with about $60,000 tied up in an MF Global Canada account. "I've been frozen for a week now."

Canada's regulator, the Investment Industry Regulatory Organization of Canada (IIROC), announced last Friday that the Canadian Investor Protection Fund (CIPF) – a fund sponsored by IIROC and its members to safeguard investors' money in the event of an investment firm's insolvency – had obtained a bankruptcy order for MF Global Canada. The firm had insufficient capital last week after its U.S. parent declared bankruptcy, tying up Canadian funds in a U.S. omnibus account used for executing trades. The move was necessary to allow the trustee to start sifting through the company to identify client money, and for CIPF to start determining whether any clients would need reimbursing for any lost funds.

But the misplacement of the Canadian client accounts with a U.S. clearing house raised questions about whether the money was even still under the protective umbrella of Canada's regulators.

"People from New York horned in and helped themselves to the money," the MF Global client said. "Is my money still protected by the CIPF? I don't know."

"It's incredible," said a source at MF Global Canada. "They gave it all away. Now we're scrambling to get it all back."

IIROC declined to comment. Officials at KPMG and CIPF were unavailable for comment.

The MF Global Canada source said the firm's staff – which numbered about 75, according to the LinkedIn profile of its chief executive officer, Stéphane Rozier – was told last Friday that as a result of the bankruptcy order, they were no longer employed by the company. But a handful remain in the offices working for free, to help sort out the company's finances and get money back for their clients.

The goal now is to get the Canadian money into the hands of KPMG so it can authorize a "batch transfer" – similar to what MF Global Holdings' U.S. trustee has been doing – that would move all the Canadian accounts at once to another Canadian financial institution. Indeed, the MF Global source said, one of the big Canadian banks has expressed a willingness to take on MF Global Canada's accounts. But that can't happen until the accounts and funds are unwound from the U.S. parent – and it's still unclear when that can happen.

The MF Global client said he has already submitted paperwork to move his account, but MF Global Canada's hands are tied.

"The regulators are supposed to ensure the safety of Canadian investors. I don't feel very safe right now."

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