For Release: June 30, 1999
Merrill Lynch International, Inc. And Merrill Lynch Pierce Fenner & Smith (Brokers & Dealers), Ltd. Pay $15 Million To Settle Charges Of Aiding And Abetting Manipulation Of The Copper Market
CFTC Finds That Firms Provided Credit And Finance, Trading
Facilities And Advice To Manipulators
The Commodity Futures Trading Commission (CFTC) announced today that it has settled an administrative enforcement action filed on May 20, 1999, as to Merrill Lynch International, Inc. and Merrill Lynch Pierce Fenner & Smith (Brokers & Dealers), Ltd. (See CFTC News Release #4265-99). The CFTC ordered the companies to pay a civil monetary penalty of $15 million and to cease and desist from violating and aiding and abetting violations of §§ 6(c), 6(d) and 9(a)(2), the anti-manipulation provisions of the Commodity Exchange Act (Act). The settlement also requires Merrill Lynch to cooperate with the CFTC in proceedings and any investigations related to this matter, and dismisses the action as to a third Respondent, Merrill Lynch & Co., Inc.
In announcing the settlement and order, CFTC Acting Chairman David Spears stated:
"Today's Order demonstrates that the CFTC stands ready to take stern action against those who would assist others in manipulating U.S. futures and commodity prices. The Commission's Order sends an important message to market participants and their brokers that aiding and abetting manipulation of U.S. markets will be met with appropriate sanctions."
Without admitting or denying the allegations of the Complaint or the findings contained in the Order, Merrill (B&D) and Merrill International consented to the entry of the Order, which finds that they aided and abetted violations of the anti-manipulation provisions of the Act during the fourth quarter of 1995. More specifically, the Order finds that the firms aided and abetted the manipulators (Sumitomo Corporation of Japan and others) in at least the following ways:
The Order states that Merrill (B&D) and Merrill International
possessed the requisite knowledge and intent to find that they aided and
abetted the manipulators' violations. In addition, the Order finds that the
Merrill (B&D) benefited from the manipulation by providing financing,
trading facilities and credit to the manipulators, and by earning profits
through its proprietary trading.
Phyllis Cela, Acting Director of the Division of Enforcement, commented on the settlement:
"The Order provides important guidance to the commodity markets about the boundaries of lawful conduct, particularly where trading strategies cross markets and borders. We recognize and thank the United Kingdom's Financial Services Authority, the Securities and Futures Authority and the London Metal Exchange for their ongoing assistance and cooperation."
The allegations in the complaint against Global Minerals & Metals Corporation, David Campbell, and Carl Alm for manipulation and attempted manipulation remain pending.
On May 11, 1998, the CFTC issued an opinion and order accepting an offer of settlement from Sumitomo Corporation finding that Sumitomo had violated the Act by manipulating the copper market, and imposing sanctions, including a cease and desist order and civil monetary penalty of $125 million. The Order also established a restitution fund of an additional $25 million, that has since been distributed to victims of the market manipulation. (See In the Matter of Sumitomo Corporation, CFTC Docket No. 98-14 and CFTC News Release #4144-98, May 11, 1998.)