Yesterday, just before 4 p.m., an email arrived at The Price Group. MF Global 1099s would be delayed, it said. The deadline to send out the 1099s to clients, February 16, would be missed and an extension had been filed.
A short time later, I learned from sources close to the matter that no 1099s are likely to be issued by MF Global for 2011. One of the leading MF Global GMI technologists had been let go the day before, so were other senior employees. They said the online account interface Emidas was dead and the back office system GMI was going to be shut down.
The gist of the conversation was this. The trustee was told by MF Global staff they needed to send out 1099s, to which the trustee responded, no they did not. Because the firm is in bankruptcy, the trustee said, they don’t have to issue 1099s. Not only was the bankruptcy trustee not interested in sending them out, but they were letting go of the key people necessary to produce these reports.
So the message is clear to me. MF Global customers will not get 1099s, pending a change of heart by the trustee, according to sources I find very credible.
A few months back I addressed this issue with some industry colleagues. I thought it was the perfect opportunity to offer a specialized service to produce 1099s for MF Global customers. They passed on the idea because they believed the trustee had a legal obligation to issue these reports. There would be no need, they said.
It is not the end of the world if MF Global customers have to figure out their own profits and losses for tax purposes, but it is a big headache.
You could argue that some customers may be better off calculating their own numbers, rather than depending on MF Global’s accounting. But there are some clients, those who were flat going into the October 31 bankruptcy, for whom the information should be accurate. For those with open positions, the 1099s would at least serve as another tool to help them compute their own figures.
There may be good reason for the trustee to delay, or indeed cancel, the 1099 duties of MF Global. But in the end, it’s another insult to the customers who have endured plenty of hardship already, now 3 ½ months after it declared bankruptcy.