WASHINGTON, D.C. — Until it filed for bankruptcy in late October, seemingly not much attention was given to MF Global. The brokerage and financial services firm is being investigated by the both the U.S. House and Senate agriculture committees to find out exactly what happened to the billions of dollars of investor funds it was handling.

On Thursday, the National Grain and Feed Assoc. (NGFA), along with 18 other farm and commodity organizations, sent a letter to Congress urging lawmakers to review the protections believed to be in place for customer-segregated funds that are now missing in the wake of MF Global’s bankruptcy.

“Our goals are two-fold: pursue all possible actions that will ensure that assets of MF Global customers will be returned quickly, and make sure this situation never recurs,” said the letter. Those were the same pleas made by investors in the wake of the bankruptcy filings by Enron and Lehman Brothers.

MF Global, run by former New Jersey governor and U.S. senator John Corzine, apparently took advantage of some legal accounting maneuvers that kept some of its financial obligations off its books. In so doing, MF Global looked like a less risky investment than it actually was.

The bankruptcy trustee responsible for identifying assets of MF Global’s commodity brokerage business is looking into a shortfall of between $600 million-$1 billion.

“Producers and agribusiness firms that rely on exchange-trading to facilitate risk management, as well as lending institutions that support them, have had their confidence shaken,” said the NGFA letter. “We always have believed that the risk to customer funds when trading on exchanges was virtually zero. Now, we see that is not the case.”

The House Committee on Agriculture will hold a hearing on the financial mess at MF Global tomorrow (Dec. 8), while the Senate Agriculture Committee will hold a hearing Dec. 13.

The NGFA sent a similar letter to the Commodity Futures Trading Commission to review the protections provided for customers. That agency, however, has stepped aside in the investigation because its chair, Gary Gensler, worked with Corzine when both were executives at Goldman Sachs.

Because of their relationship, the review will be handled by another government oversight organization, the Security Investors Protection Corp.

Also looking into MF Global’s operation is the Securities and Exchange Commission (SEC). In a statement, SEC Chair Mary Schapiro said it will take a close look at the accounting techniques MF Global used. At the same time, the New York Stock Exchange has announced it will delist MF Global after federal regulators announced that the brokerage did not segregate customers’ money from the company’s money.

MF Global, like all brokerages, makes investments using customer funds as well as its own funds for its own investments. Regulations require, however, that customer funds be kept separate from company funds in the event of a financial collapse so customers will be able to get their money back. Because customer funds are unaccounted for, the FBI is investigating possible criminal violations. In the meantime, assets of MF Global have been frozen by the bankruptcy court – and that means investors, including farmers, cannot move their funds to take advantage of market conditions.

In fact, farmers are getting, at best, access to only 60 percent of their funds and in some cases, as little as 5 percent.

According to MF Global’s website, it “works to help agricultural clients ranging from farmers, food processors and ethanol producers, to importers-exporters, understand the forces that move markets and their impact on price discovery.”

It continues: “Working with each client, we design customized solutions – using forwards, spots and specialized products – to help manage, transfer or hedge the risks associated with agricultural commodities.”

MF Global’s roots date back to 1783 and Englishman James Man who set up a sugar trading business that evolved into a commodities trading house. MF Global became a financial services business in the 1980s. For decades, the company operated as ED&F Man, and later as Man Financial, but in 2007, the name was changed to MF Global.

As Congress prepares for hearings, the NGFA and other commodity groups are asking legislators to look into issues surrounding the adequacy of protections for customer accounts. The groups want to know how frequently customer accounts were audited, who audited them and who was responsible for enforcement.

“The U.S. agricultural sector relies heavily on regulated exchanges for risk management,” said the letter. “The ability of both commercial and producer hedgers to use futures markets … depends on lenders agreeing to meet margin calls, which demands full confidence by all lenders in the safety of those funds.”