SIB carpeted trader five years ago
Thursday 20 June 1996
But explanations offered by Sumitomo and its rogue trader, Yasuo Hamanaka, appear to have been accepted, and Mr Hamanaka continued to trade until last month.
His face-to-face session with top British regulators emerged as SIB announced a wide-ranging six-month review of the London Metal Exchange and the wider metals markets, which Sir Andrew Large, SIB chairman, said he would publish.
The review is certain to lead to reform of the LME. One option could be to give member firms legal responsibility for ensuring honest behaviour by their clients. There is also likely to be an attempt to tighten controls of the huge over-the-counter copper market outside the LME.
David King, chief executive of the LME, placed the blame for the copper scandal firmly on Sumitomo Corporation. Sir Andrew said it was an example of the damaging impact of "non-member, non-regulated firms".
Mr King said: "We are talking about lack of internal controls and management superv- ision of a big corporation on the other side of the world which is not in our jurisdiction, and a problem that has been going on for 10 years under their noses."
Mr King confirmed that in 1991 David Threlkeld - who then ran a metals business in London - sent him documentary evidence that Mr Hamanaka had requested confirmation of a number of big copper trades that had never taken place. Mr King said he informed LME members he had received the documents.
He added: "As a consequence Mr Hamanaka and another Sumitomo representative came to SIB for a meeting which I attended. At that meeting Mr Hamanaka endeavoured to explain the purpose of the documentation."
Mr King declined to quote Sumitomo's explanation - believed to be that the documents showing the non-existent trades were needed to satisfy the Japanese tax authorities.
But Mr King said that Mr I Nishuimi, a director of Sumitomo, had confirmed to the press that "the Japanese tax authorities were satisfied with the documentation".
Mr King said that from the LME point of view "we took all the appropriate steps, we advised our own regulatory authority, we disclosed the existence of the documents to our members and we addressed the matter with Sumitomo."
Mr King said that in 1991 - and again in 1993 - the LME also expressed concern to Sumitomo about the size of its activities in the market and introduced a system of reporting large positions to monitor trading.
In our report yesterday, we wrongly described Global Minerals and Metals Corporation as broking or hedging on behalf of Sumitomo. Global is an independent copper trading company, and Sumitomo is an important customer.
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