2010-06-30 06:51:33
By David Sheppard David Sheppard Tue Jun 29, 11:43 am ET
LONDON (Reuters) Britain's financial regulator has fined and banned a former
broker for manipulating oil prices by buying more than 7 million barrels while
on a drinking binge.
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.
The FSA said Perkins bought huge volumes of Brent crude oil
in the early hours of the morning on June 30, 2009 after drinking heavily for
several days and then lied repeatedly to his employer to cover up his actions.
"Perkins' drunkenness does not excuse his market abuse," said Alexander
Justham, director of markets at the FSA.
"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."
The trades landed PVM with a loss of $10 million last summer. The company is
the world's largest independent oil broker, executing trades on behalf of
clients but not carrying out trading for its own account.
The FSA said PVM was quick to contact them after it uncovered the trades and
made no criticism of the firm in the ruling. A PVM spokesman said the matter
was "now fully closed."
EXPENSIVE ROUND OF GOLF
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.
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, the
FSA said.
Perkins illicit trades started with his 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.
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.
"As a direct result of Perkins' (Tuesday) trading, the price of Brent increased
significantly," the FSA said.
"He claims to have limited recollection of events Monday and claims to have
been in an alcohol-induced blackout at the time he traded."
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.
FSA CRACKDOWN?
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.
Brokers in London said the FSA appears to be trying to tighten its regulation
of commodity markets, but the first two actions had been relatively
straightforward.
"I suspect they're trying to seem tough, to look like they're doing something,"
one broker said. "I remain unconvinced they truly understand commodity markets
or can get to grips with them."
Oil and commodity markets have come under increased scrutiny after prices
spiked to a series of record highs in 2008.
In the United States, the Commodity Futures Trading Commission (CFTC) proposed
position limits for oil and gas futures markets earlier this year in an effort
to rein in excessive speculation.
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.
(Additional reporting by Christopher Johnson; editing by Jane Baird