US regulators last night took action against Refco, one of the world’s largest derivatives brokers, as the repercussions of its chief executive being charged with fraud continued to reverberate across Wall Street.
In a step that reflected the severity of the situation, the securities and exchange commission placed trading restrictions on the business, limiting Refco Securities and Refco Clearing from making transactions over a certain size for 20 business days.
Refco said it was pulling down the shutters on its securities arm – which makes 50% of its revenues – in an attempt to conduct an orderly unwinding of multi-million dollar positions.
In less than a week the brokerage firm has been transformed from being one of Wall Street’s most successful firms to one fighting for survival after its chief executive, Phillip Bennett, was charged with defrauding investors by using a hedge fund to hide $430m (£250m) of debts.
