Most of the senior executives at MF Global Holdings Ltd. weren't registered with commodities regulators, meaning the executives can't be charged with supervision failures related to the firm's collapse.
The situation is a headache for regulators as they press ahead with their 7½-month investigation of MF Global.
"Failure to supervise" sanctions generally are much easier to prove than allegations of deliberate wrongdoing, according to legal experts uninvolved in the case. In addition, the probe hasn't yet produced smoking guns that show anyone at MF Global knowingly raided the customer funds that went missing in the firm's final days.
Among top officials at MF Global, only former Chairman and Chief Executive Jon S. Corzine was registered with the Commodity Futures Trading Commission when the New York company filed for bankruptcy-court protection in October, regulatory records show.
Those who weren't registered include Henri Steenkamp, MF Global's finance chief, company treasurer Vinay Mahajan and Edith O'Brien, an assistant treasurer responsible for approving transfers and monitoring their impact on customer accounts.
CFTC records show that Chief Operating Officer Bradley Abelow and General Counsel Laurie Ferber were each a "principal" of the securities firm. But that doesn't count as registration under CFTC rules, meaning they also are off the hook for potential enforcement action for failure to supervise.
Mr. Corzine also is one of the few top MF Global officials who could face a potential futures-industry ban if regulators decide to bring such a case against him. The former New Jersey governor and Goldman Sachs Group Inc. GS +0.49% chairman was a member of the National Futures Association, a futures-industry self-regulator.
Many people working in the futures industry are required to join the association, particularly those involved directly in dealing with customers. But most MF Global executives weren't, and the association's power to seek bans is limited to its own members, according to a spokesman for the NFA.
It isn't clear why Mr. Corzine chose to register with the NFA or CFTC, and his spokesman declined to comment. Regulatory records show he was registered with the agency while at Goldman in the late 1990s and rejoined around the time he took over at MF Global.
Lawyers for Mr. Steenkamp, Mr. Abelow, Ms. O'Brien and Mr. Mahajan declined to comment. A lawyer for Ms. Ferber couldn't be reached.
After taking over as MF Global's chief executive in March 2010, Mr. Corzine engineered a wager on shaky European sovereign bonds that peaked at nearly $7 billion before the firm's October collapse. He told lawmakers that he didn't direct or intend to direct the misuse of customer funds at MF Global.
Sellers of financial products subject to CFTC oversight must register with the agency, as do their managers. But executives in charge of back-office tasks and internal controls typically don't register, according to government officials and outside lawyers.
Despite the roadblock, regulators haven't ruled out other charges against former MF Global officials or the company. A person close to the investigation said there could be sufficient evidence to accuse MF Global of breaching the strict rules requiring customer money to be kept separate from other funds. The person questioned whether it would be worth filing a case against a firm in bankruptcy.
CFTC officials also could try to hold one or more MF Global officials liable as a "control person" for rule-breaking by lower-level employees. But executives can defend against this charge successfully if they can show they acted in good faith.
Another potential legal weapon by the CFTC: allegations that MF Global executives were "aiding and abetting" offenses committed by the firm. But the agency would have to show the individuals intentionally helped to commit wrongdoing, according to legal experts.
The chaos at MF Global in its last days, with some orders to transfer funds recorded on Post-it Notes, also could make it even harder to show deliberate wrongdoing, according to another person close to the government investigations.
"In my experience, a failure to supervise claim is generally easier to establish" than a control person or aiding and abetting case, said Dan Waldman, a former CFTC general counsel who is now a partner at law firm Arnold & Porter LLP.
The Securities and Exchange Commission is jointly conducting the civil investigation with the CFTC, according to someone close to the matter.
Last week, bankruptcy trustee James Giddens said he would decide within 60 days whether to pursue legal claims for negligence against Mr. Corzine and other top officials at the firm.
A Justice Department investigation of MF Global still is active, according to people close to the probe. But prosecutors face significant hurdles, including the need to show individuals intended to break the law.