The U.S. futures regulator on Thursday said it has launched a formal investigation into bankrupt MF Global, increasing pressure on the brokerage as the search for roughly $600 million in missing funds continues.

The announcement by the Commodity Futures Trading Commission is rare in that the agency typically does not publicly announce probes it is launching.

The regulator said its enforcement division began investigation on October 31, and added announcing the review was in the public interest. The agency does not intend to provide further updates on the review.

This isn't just a lost and found inquiry; it's a full-on effort to get to the bottom of what appears to be a massive hide-and-seek ploy, Bart Chilton, a Democratic commissioner, told Reuters.

The CFTC also said Jill Sommers, a Republican commissioner, would take the lead on matters related to MF Global. She replaces Chairman Gary Gensler who has recused himself from the investigation.

Sommers said in a statement that separate from the MF Global probe, the CFTC will review clearing futures commission merchants to ensure that customers funds are being properly segregated from firm money, in accordance with the Commodity Exchange Act and CFTC regulations.

U.S. regulators are undertaking a sweeping review into the business practices of MF Global as they search for roughly $600 million in missing money. The FBI also has shown a preliminary interest in regulatory probes looking into the missing funds.

MF Global's trades on European debt helped trigger its collapse. The broker's exchange regulator, CME Group Inc, has said MF Global did not properly segregate customer funds from its own, a violation of futures market brokerage rules that leaves client funds vulnerable.

It also has said MF Global appeared to have made transfers of customer segregated funds in a manner that may have been designed to avoid detection.

Gensler has defended the agency's oversight of MF Global, telling reporters last week that it has been very much on the beat. He pointed out an action the CFTC took against the firm in December 2009 that resulted in a settlement of $10 million.

But Gensler has been careful to distance himself from the current MF Global review. Reuters reported last week he was not participating in the investigation of MF Global so he would not become a distraction or risk creating an appearance of a conflict of interest.

Gensler and Jon Corzine, who resigned as MF Global's chief executive last week, worked at Goldman Sachs Group Inc at the same time and held prominent positions. They both left the investment bank in the late 1990's.

(Editing by Bob Burgdorfer and Sofina Mirza-Reid)

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