The National Grain and Feed Association(NGFA) has issued its preliminary recommendations for safeguarding the sanctity of customer funds in the aftermath of the MF Global Inc. bankruptcy. "The demise of MF Global has shaken the confidence of many futures market participants concerning the safety of segregated customer funds," the NGFA said in recent letters to the Senateand House Agriculture Committeesand the Commodity Futures Trading Commission(CFTC). "We believe these preliminary recommendations are essential to begin reestablishing confidence among futures market participants and to help safeguard customer funds."

But the NGFA said that while its initial recommendations will help enhance reporting, transparency and accountability in handling customer funds, they represent only first steps that can and should be implemented quickly

The NGFA said it continues to evaluate more substantive changes designed to protect against a future MF Global-type situation and the adverse impact it has had on those with customer-segregated funds. Additional potential options being examined by the NGFA include various "full-segregation models" for isolating and safeguarding customer funds, and the costs associated with doing so; the viability and costs associated with extending insurance coverage to commodities accounts, either privately provided or under the type of insurance program currently in place for securities accounts; and potential changes to the U.S. bankruptcy code to prevent segregated customer funds from being swept into liquidation proceedings and to prevent the so-called "safe harbor" provisions of the bankruptcy code – which require proving fraudulent conveyance – from preventing a retrieval of customer funds. The NGFA said it plans to complete its evaluation and offer additional potential recommendations by early June.