SIB warns on conflict of interest at LME

The Securities and Investments Board (SIB) said yesterday that serious potential conflicts of interest at the top of the London Metal Exchange (LME) should be removed as soon as possible.

The City's senior regulator was proposing a seven-point programme of improvements at the LME, the result of a six-month investigation into regulation of the metals market.

The inquiry was launched in the summer after Yasuo Hamanaka, a copper trader at Sumitomo, ran up losses of $2.6bn (pounds 1.6bn) for his employer, and SIB is to monitor progress at the LME over the next 12 months..

The SIB report said there had been occasions when conflicts of interest ruled out so many board members of the LME from an active interest that a special committee of the chief executive, including a co-opted outsider, had to be set up to deal with market developments.

SIB made no allegation that conflicts of interest had led to abuse of inside information obtained while regulating the metal markets. But it made clear its concerns about the seriousness of the risks arising from the market's organisation.

The report said: "In order to secure the confidence of users of the LME, it is also essential that the board as a whole and its individual members are seen to have ensured that they do not misuse information gained for regulatory purposes."

There should be a clear separation between regulatory tasks and the commercial activities of the exchange "so that confidentiality of information can be seen to be preserved".

The LME board should formally delegate responsibility for monitoring trading to the executive and it should "continue to arrange its affairs so that it does not have access to market-sensitive information and should make clear publicly that this is the case".

One of SIB's recommendations is that the LME creates a post of head of market regulation and enforcement to give a "higher profile and a sharper focus at a senior level" to regulation and enforcement. Raj Bagri, chairman of the LME, insisted that there had never been any problem in practice but agreed that the SIB recommendation would prompt changes in LME organisation and an increase in the number of independent directors, which he expects to rise from one to at least three. The staff of 44 will rise by about a fifth.

Mr Bagri said: "It is not just a question of doing the right thing but of being seen to be doing the right thing."

The report was attacked by David Threlkeld, a copper trader, who warned the LME about Mr Hamanaka's activities in 1991. "You need a new executive entity on the LME with teeth and powers to put a stop to corruption and fraud."

The SIB report came down against radical changes in the distinctive way the LME operates, which arises from its deep involvement with producers and end users of metal.

But it urged more independent directors and an exchange of information with the SFA.

Start your day with The Independent, sign up for daily news emails
News
Bobbi Kristina Brown with her mother Whitney Houston in 2011
people
News
The actress Geraldine McEwan was perhaps best known for playing Agatha Christie's detective, Miss Marple (Rex)
peopleShe won a Bafta in 1991 for her role in Oranges Are Not The Only Fruit
News
peopleHere's what Stephen Fry would say
Sport
David Silva celebrates with Sergio Aguero after equalising against Chelsea
footballChelsea 1 Manchester City 1
PROMOTED VIDEO
ebooks
ebooksA special investigation by Andy McSmith
Arts and Entertainment
Caroline Proust as Captain Laure Berthaud in 'Spiral'
tvReview: Gritty, engaging and well-acted - it’s a wonder France’s biggest TV export isn’t broadcast on a more mainstream channel
Arts and Entertainment
music
Arts and Entertainment
Laura Carmichael in still from Madam Bovary trailer
film
News
i100
Sport
Serena Williams holds the Australian Open title
sportAustralia Open 2015 final report
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

Recruitment Genius: Software Development Manager

£40000 - £50000 per annum: Recruitment Genius: This is an exciting opportunity...

Ashdown Group: Product Manager - (Product Marketing, Financial Services)

£30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

Recruitment Genius: Compliance Assistant

£13000 per annum: Recruitment Genius: This Pension Specialist was established ...

Ashdown Group: Market Research Executive

£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

Day In a Page

As in 1942, Germany must show restraint over Greece

As in 1942, Germany must show restraint over Greece

Mussolini tried to warn his ally of the danger of bringing the country to its knees. So should we, says Patrick Cockburn
Britain's widening poverty gap should be causing outrage at the start of the election campaign

The short stroll that should be our walk of shame

Courting the global elite has failed to benefit Britain, as the vast disparity in wealth on display in the capital shows
Homeless Veterans appeal: The rise of the working poor: when having a job cannot prevent poverty

Homeless Veterans appeal

The rise of the working poor: when having a job cannot prevent poverty
Prince Charles the saviour of the nation? A new book highlights concerns about how political he will be when he eventually becomes king

Prince Charles the saviour of the nation?

A new book highlights concerns about how political he will be when he eventually becomes king
How books can defeat Isis: Patrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad

How books can defeat Isis

Patrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad
Judith Hackitt: The myths of elf 'n' safety

Judith Hackitt: The myths of elf 'n' safety

She may be in charge of minimising our risks of injury, but the chair of the Health and Safety Executive still wants children to be able to hurt themselves
The open loathing between Barack Obama and Benjamin Netanyahu just got worse

The open loathing between Obama and Netanyahu just got worse

The Israeli PM's relationship with the Obama has always been chilly, but going over the President's head on Iran will do him no favours, says Rupert Cornwell
French chefs get 'le huff' as nation slips down global cuisine rankings

French chefs get 'le huff' as nation slips down global cuisine rankings

Fury at British best restaurants survey sees French magazine produce a rival list
Star choreographer Matthew Bourne gives young carers a chance to perform at Sadler's Wells

Young carers to make dance debut

What happened when superstar choreographer Matthew Bourne encouraged 27 teenage carers to think about themselves for once?
Design Council's 70th anniversary: Four of the most intriguing prototypes from Ones to Watch

Design Council's 70th anniversary

Four of the most intriguing prototypes from Ones to Watch
Art should not be a slave to the ideas driving it

Art should not be a slave to the ideas driving it

Critics of Tom Stoppard's new play seem to agree that cerebral can never trump character, says DJ Taylor
Bill Granger recipes: Our chef's winter salads will make you feel energised through February

Bill Granger's winter salads

Salads aren't just a bit on the side, says our chef - their crunch, colour and natural goodness are perfect for a midwinter pick-me-up
England vs Wales: Cool head George Ford ready to put out dragon fire

George Ford: Cool head ready to put out dragon fire

No 10’s calmness under pressure will be key for England in Cardiff
Michael Calvin: Time for Old Firm to put aside bigotry and forge new links

Michael Calvin's Last Word

Time for Old Firm to put aside bigotry and forge new links