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Commitments and Contingencies
9 Months Ended
Jun. 30, 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.
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. On May 27, 2022, StoneX Commodity Solutions LLC received $30.4 million from the final disposition of the proceeds of grain. The amount received through the bankruptcy proceedings was insufficient 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 the shortfall, and discussions with the Company’s insurance carriers are ongoing. As of June 30, 2022, receivables from clients, net, in the condensed consolidated balance sheet includes $1.2 million, net of an allowance of $3.0 million, relating to the shortfall in the proceeds the Company received in connection with the Bankruptcy court approved settlement agreement. There can be no
assurance as to the Company’s ability to recover any amounts, relating to the shortfall in proceeds received, 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 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 providing services only to “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 clients’ 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 June 30, 2022, the receivable from these client accounts, net of collections and other allowable deductions (the “Net Client Accounts Receivable”), was $27.4 million, with no individual account receivable exceeding $1.4 million. As of June 30, 2022, the allowance against these uncollected balances was $7.8 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 consider developments in these matters in determining 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 has, and will continue 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.
During July 2022, the Company prevailed in an arbitration proceeding 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. This arbitration victory followed a similar outcome in a separate arbitration decision issued in January 2022, in which the arbitration panel also denied the claims against the Company for trading losses incurred by the shareholders and ordered the accountholders to pay their outstanding deficits to the Company. During the three months ended June 30, 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 June 30, 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 June 30, 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.