Compliance July 1, 2010

Broker Fined for Manipulating Oil Prices

Britain's financial regulator has fined and banned a former broker for manipulating oil prices by buying more than seven million barrels while on a drinking binge.
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The Financial Services Authority (FSA) said it fined Steven Perkins, a former employee of PVM Oil Futures Ltd, 72,000 pounds ($108,000) and banned him from working in financial services for at least five years for carrying out trades without the authority of clients or his employer, according to Reuters. Perkins’ unauthorized trading pushed the price of Brent crude oil futures up to almost $73.50 a barrel — at that point the highest level prices had hit on the InterContinental Exchange in 2009.  

According to the news report, in the days leading up to the trades, Perkins had been drinking heavily at a company golf weekend and had carried on drinking on the Monday afternoon. Perkins started the trades by telephoning in eight orders to PVM’s Brent trading desk, saying they were all on behalf of a trader described by the FSA as ‘Client A’, who had only ordered one initial deal.  

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In the early hours of Tuesday morning, Perkins then started to trade Brent crude from his laptop at home, accumulating a total of 7,125,000 barrels in just over two hours. 

PVM uncovered the trades as clerks and compliance officers came into the office Tuesday morning. Perkins initially lied to the firm, saying Client A had been with him through the night before the company shut off his ability to trade.  

The FSA said Perkins claims to have limited recollection of events and claims to have been in an alcohol-induced blackout at the time he traded.  

“Perkins’ drunkenness does not excuse his market abuse,” said Alexander Justham, director of markets at the FSA, in the news report. “Perkins has been banned because he is not a fit and proper person to be involved in regulated activities, and his behavior posed a risk to the proper functioning of the market.”  

According to Reuters, the ruling marks only the second action by the FSA against market abuse in commodities in London. Earlier this month, former Sucden Financial coffee broker Andrew Kerr was banned and fined 100,000 pounds after being caught on a recorded phone line planning to artificially inflate the price of London-based coffee futures.   

The British financial regulator is expected to conclude more investigations into market abuse in commodities this summer, following criticism it neglected the sector in the past.
Data & Research July 1, 2010

Informa Research Services Releases 2010 U.S. Consumer Wealth Study

Informa Research Services has released a report that examines U.S. household asset allocation and preferences.
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The study shows which financial institutions are preferred and which types of investment and deposit products hold the majority of the wealth. 

In an environment where financial institutions are scrambling for deposits, the mass affluent sector seems to be severely ignored, according to the study findings. Results revealed that in a potential pool of more than $5.3 trillion in retirement savings held outside of retirement plans, banks only hold about $1.6 trillion and are at risk of losing even those deposits. 

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“The survey results showed that only 10% of the mass affluent consumers view their bank as a viable solution for retirement investing,” said Chad Watkins, manager of market intelligence at Informa Research Services. “Unless financial institutions change this consumer perception, they are at risk of losing these deposits to brokerage and insurance companies.” 

The study is based on a national survey of nearly 1,000 respondents conducted in April 2010 via an online panel of U.S. households. Forty-six questions were posed. Participants were at least 25 years of age and report at least $100K in investable assets (excluding assets invested in structured retirement plans). 

For more information, contact Chad Watkins at 800-848-0218 Ext. 48407 or go to www.informars.com. 

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