Independent directors beef up LME regulation

The London Metal Exchange is expected to beef up its board with more independent directors and set up new information-sharing arrangements with the Securities and Futures Authority, after the official report on the Sumitomo affair is published, probably next week.

But the LME is thought to have lost a campaign to require all metal traders in London to become members of the exchange.

Sumitomo and some of the traders through which it dealt were not members of the LME and were outside its regulatory control when Yasuo Hamanaka, the Japanese company's rogue trader, ran up copper losses of $2.6bn in the spring.

Some copper traders such as Winchester Commodities were, however, registered by the Securities and Futures Authority, the securities market regulator.

The report by the Securities and Investments Board, the senior City regulator, was begun after a request in June from Raj Bagri, chairman of the LME, shortly after the copper scandal came to light.

Mr Bagri said yesterday: "We find it incongruous that under the Financial Services Act people can trade millions of tonnes of metal without needing to be members of the LME. They can be just members of the SFA."

However, under existing legislation the SFA cannot require a trader to join the LME. Mr Bagri said he believed it was essential that the Act should be changed but conceded that there would be a problem finding parliamentary time.

In the absence of changes in the Act, the best alternative would be to obtain information on copper trading businesses and their staff from the SFA and "exercise jurisdiction via the SFA", he said.

Mr Bagri added that the LME had made clear to the SFA several years ago that it would like access to more information about copper market participants who were not exchange members.

Mr Bagri, who was re-elected chairman for a fifth term on Wednesday, said four of the 16 directors of the LME were "invited" members and one of these was independent of the metals industry. The total of invited directors would be increased to five or six and at least half of this category would be independents.

Other changes at the LME will include a substantial increase in its present secretariat of 45 as part of a drive to toughen market surveillance, information reporting, compliance and monitoring in the wake of the Sumitomo affair.

The SIB report is expected to recommend a tightening of the LME's rulebook and it is also certain to back international moves this autumn to improve co-operation among regulators, including the Windsor accord which agreed new information-sharing arrangements.

There is no suggestion that large international copper dealers such as Sumitomo should be brought inside the London regulatory framework, which would be impractical. The drive to prevent future scandals is concentrating on improving the links between regulators to ensure information is exchanged and warnings are acted on.

LME questions about Mr Hamanaka's activities several years ago were ignored by the company and the Japanese authorities.

The rulebook will be strengthened to allow the market authorities to obtain more information from members on their own and their clients' business dealings. Members will be pressed to give more information on over- the-counter business, outside the exchange.

Start your day with The Independent, sign up for daily news emails
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Neil Pavier: Management Accountant

£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...

Sheridan Maine: Commercial Accountant

£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...

Laura Norton: Project Accountant

£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

Day In a Page

Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

Sun, sex and an anthropological study

One academic’s summer of hell in Magaluf
From Shakespeare to Rising Damp... to Vicious

Frances de la Tour's 50-year triumph

'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
'That Whitsun, I was late getting away...'

Ian McMillan on the Whitsun Weddings

This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
Kathryn Williams explores the works and influences of Sylvia Plath in a new light

Songs from the bell jar

Kathryn Williams explores the works and influences of Sylvia Plath
How one man's day in high heels showed him that Cannes must change its 'no flats' policy

One man's day in high heels

...showed him that Cannes must change its 'flats' policy
Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine
Letterman's final Late Show: Laughter, but no tears, as David takes his bow after 33 years

Laughter, but no tears, as Letterman takes his bow after 33 years

Veteran talkshow host steps down to plaudits from four presidents
Ivor Novello Awards 2015: Hozier wins with anti-Catholic song 'Take Me To Church' as John Whittingdale leads praise for Black Sabbath

Hozier's 'blasphemous' song takes Novello award

Singer joins Ed Sheeran and Clean Bandit in celebration of the best in British and Irish music
Tequila gold rush: The spirit has gone from a cheap shot to a multi-billion pound product

Join the tequila gold rush

The spirit has gone from a cheap shot to a multi-billion pound product
12 best statement wallpapers

12 best statement wallpapers

Make an impact and transform a room with a conversation-starting pattern
Paul Scholes column: Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?

Paul Scholes column

Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?