MF Global was a staunch opponent of proposed limits on the kind of investments that eventually brought down the brokerage.
NEW YORK (CNNMoney) -- More than a year ago, federal regulators tried to put new limits on the types of risky bets on foreign sovereign debt that brought down Wall Street firm MF Global this week.
At the time, the now-defunct brokerage fought hard against such efforts. MF Global argued that existing rules had a "stellar record" of protecting clients from losses, and that the new rules were an attempt to "fix something that is not broken." (MF Global: Sorting through the debacle.)
The rule, which is still pending, was proposed in 2010 by the Commodity Futures Trading Commission to prevent broker-dealers from investing client funds in sovereign debt. On Monday, MF Global (MFGLQ) filed for bankruptcy after making huge unsuccessful bets on European sovereign debt, though it's not yet clear if the firm used any client funds to do so.
As it is, MF Global has been accused of violating other rules about keeping customer funds separate from its own assets when engaged in trading. An attorney for the CFTC told the bankruptcy judge Wednesday that $633 million in client funds are unaccounted for. The trustee in the case has started an investigation into the missing funds and was granted the power to subpoena firm executives, clients and other parties on Friday.
But on Dec. 2, 2010, MF Global joined with rival trading firm Newedge to argue against the proposed CFTC rule. Attorneys for the two firms argued the new rule would "eliminate a liquid, secure, profitable and necessary category of investment" for futures dealers.
"We believe the current investment criteria set forth under (existing rules) have worked, including over the past two years of market instability and uncertainty -- the ultimate stress test," said the letter.
Ed Pekarek, the assistant director of the Investor Rights Clinic of John Jay Legal Services and a Pace University visiting law professor, characterized the comments as "dripping with irony."
"This certainly seems to be a case where regulators came close to thwarting this debacle, or at a minimum, may have lessened its severity greatly," Pekarek said. "Regulators got it right, and recognized a year ago that sovereign debt exposure was far from riskless."
Indeed, with the demise of MF Global, the concern on Wall Street is that the CFTC's proposed rule is now more likely to be passed.
MF Global did not return calls seeking comment.
Gary DeWaal, the group general counsel for Newedge who also signed the 2010 letter to the CFTC, said the firm still opposes limiting investments in foreign debt because it would harm clients whose accounts contain currencies other than dollars.
"It seems unfair to expose clients who have foreign currency balances to U.S. dollar risk," he said. "That would add additional risk to the system that doesn't exist today." 
