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Commitments and Contingencies
6 Months Ended
Mar. 31, 2022
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies Commitments and Contingencies
Contingencies
In the ordinary course of business, the Company holds commodities inventory in third-party licensed grain facilities. As of March 31, 2022, the Company held title, in the form of warehouse receipts, to approximately 2.8 million bushels of soybeans, in multiple facilities owned by one third-party operator. On September 29, 2021, the above-mentioned third-party operator filed a petition for Chapter 11 bankruptcy, and a Chief Restructuring Officer (“CRO”) was assigned by the court to assist in administering the allocation of the grain on hand and proceeds from the sale of processed soybean products.
Since September 29, 2021, under the supervision of the CRO, the grain facility continued to process soybeans and sell product to external third parties, with proceeds from sales collected into an independently held trust account. Since September 29, 2021, there have been numerous filings with the court, and the deadline for the final disposition of grain or the proceeds of grain was scheduled for May 2, 2022. On April 13, 2022, a joint motion was filed with the court by the Company, along with numerous other interested parties, to extend the deadline for the final disposition of grain or the proceeds of grain to a future date to be determined following the setting of the final determination hearing. This was done to facilitate additional settlement discussions among the parties and to further certain agreements already made.
On May 2, 2022, the Bankruptcy court approved a settlement agreement entered into by the Company’s subsidiary StoneX Commodity Solutions, LLC, certain banks, farmer groups and other parties to provide for the distribution of bankruptcy proceeds and assets. The settlement agreement order does not dispose of claims by certain farmer groups and the Bankruptcy court is expected to rule on these claims during May 2022, at which time the final amount to be received by the Company in respect of the approximately 2.8 million soybean bushels it holds title to will be determined.
There is uncertainty as to whether the amount expected to be received through the bankruptcy proceedings will be sufficient to cover the asset value of the soybean bushels, and the Company continues to evaluate its insurance coverage under applicable policies in-force, to cover any potential shortfall, and discussions with the Company’s insurance carriers are ongoing. During the three months ended March 31, 2022, the Company recorded an allowance of $3.0 million relating to a potential shortfall in the proceeds it receives from the final adjudicated disposition (including settlements reached) of this matter. As of March 31, 2022, receivables from clients, net in the condensed consolidated balance sheet includes $31.6 million related to this matter. There can be no assurance as to the outcome of the final adjudication (including settlements reached) or the Company’s ability to recover incurred loss through insurance coverage.
In November 2018, balances in approximately 300 client accounts of the FCM division of the Company’s wholly owned subsidiary, StoneX Financial Inc., declined below required maintenance margin levels, primarily as a result of significant and unexpected price fluctuations in the natural gas markets. All positions in these accounts, which were managed by OptionSellers.com Inc. (“OptionSellers”), an independent Commodity Trading Advisor (“CTA”), were liquidated in accordance with the StoneX Financial Inc.’s client agreements and obligations under market regulation standards. 
A CTA is registered with the U.S. Commodity Futures Trading Commission (“CFTC”) and a member of, and subject to audit by, the National Futures Association (“NFA”). OptionSellers is registered under a CFTC Rule 4.7 exemption for “qualified eligible persons,” which requires the account holders authorizing OptionSellers to act as their CTA to meet or exceed certain minimum financial requirements. OptionSellers, in its role as a CTA, had been granted by each of its clients full discretionary authority to manage the trading in the client accounts, while StoneX Financial Inc. acted solely as the clearing firm in its role as the FCM.
StoneX Financial Inc.’s client agreements hold account holders liable for all losses in their accounts and obligate the account holders to reimburse StoneX Financial Inc. for any account deficits in their accounts. As of March 31, 2022, the receivable from these client accounts, net of collections and other allowable deductions (the “Net Client Accounts Receivable”), was $28.1 million, with no individual account receivable exceeding $1.4 million. Previously, StoneX Financial Inc. recognized a cumulative-effect adjustment to record an allowance against these uncollected balances of $8.2 million, as part of its CECL implementation effective October 1, 2020, and as of March 31, 2022, the allowance against these uncollected balances was $8.0 million. The Company believes it has a valid claim against these clients, based on the express language of the client contracts and legal precedent, and intends to pursue collection of these claims vigorously. The Company will continue considering information in determining any changes in the allowance against the carrying value of these uncollected balances.
Additionally, StoneX Financial Inc. has been named in arbitrations brought by clients seeking damages relating to the trading losses in these accounts. The Company believes that such cases are without merit and intends to defend them vigorously. The ultimate outcome of these arbitrations cannot presently be determined; however, the Company believes the likelihood of a material adverse outcome is remote.
In January 2022, the Company prevailed in the first arbitration involving accountholders that were clients of OptionSellers. The arbitration panel denied the claims against the Company for trading losses incurred by those accountholders and also ordered those accountholders to pay their outstanding deficit balances to the Company. During the three months ended March 31, 2022, the Company also entered into settlements with certain other accountholders whereby certain of these accountholders agreed to
pay their outstanding deficit balances (none of which settlements involved the Company making any payments in respect of trading losses). There can be no assurance as to the outcome of future arbitrations or the Company’s ability to collect on successful court-awarded client receivables.
Depending on future collections and arbitration proceedings, any provisions for bad debts and actual losses ultimately may or may not be material to the Company’s financial results. The Company does not currently believe that any potential losses related to this matter would impact its ability to comply with its ongoing liquidity, capital, and regulatory requirements.
Legal Proceedings
From time to time and in the ordinary course of business, the Company is involved in various legal actions and proceedings, including tort claims, contractual disputes, employment matters, workers’ compensation claims and collections. The Company carries insurance that provides protection against certain types of claims, up to the relevant policy’s limits.
As of March 31, 2022 and September 30, 2021, the Condensed Consolidated Balance Sheets include loss contingency accruals which are not material, individually or in the aggregate, to the Company’s financial position or liquidity. In the opinion of management, possible exposure from loss contingencies in excess of the amounts accrued, is not likely to be material to the Company’s earnings, financial position or liquidity.
Other than the updates provided within Contingencies, above, there have been no material changes to the legal actions and proceedings compared to September 30, 2021.
Contractual Commitments
Self-Insurance
The Company self-insures its costs related to medical and dental claims. The Company is self-insured, up to a stop loss amount, for eligible participating employees and retirees, and for qualified dependent medical and dental claims, subject to deductibles and limitations. As of March 31, 2022, the Company had $1.3 million accrued for self-insured medical and dental claims included in Accounts payable and other accrued liabilities in the Condensed Consolidated Balance Sheet.