Anybody who puts money into a brokerage account puts a lot of faith in their broker. That trust is being shaken, again. Nine months after the collapse of MF Global, with its $1.6bn in missing customer funds, comes word of another disappearance, this time of $200m at Peregrine Financial Group, a Chicago futures broker.

The situation at Peregrine is an embarrassment for regulators. “Limited reviews” of customer accounts spearheaded by the Commodity Futures Trading Commission, completed after MF Global’s meltdown, found PFG in compliance. Calls for better regulation, customer protection and oversight are now inevitable.

The National Futures Association, Peregrine’s regulator, said that it received information indicating that Russell Wasendorf Sr, the firm’s chairman, may have falsified bank records and the CFTC is suing on allegations of fraud, customer fund violations and making false statements. The situation came to light after an apparent suicide attempt by Mr Wasendorf.

The problems at the two brokers highlight the need for a hard look at how the futures brokerage industry does business. But reformers should keep two things in mind. First, outright theft is even harder to stop in advance than foolish risk-taking. The sanctity of the divide between client accounts and a firms’ own capital is already well established. No reform proposal should adopt the impossible goal of eliminating the need for trust and integrity. Second, the cost of any proposed remedy will ultimately be passed on to brokerage customers.

After MF Global’s collapse, some in the commodity futures industry proposed setting up a protection fund financed by brokers that would ease the transfer of customer accounts if a problem arose with a broker. This sounds sensible, but it won’t be free.

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