London 06/01/2016 - The London Metal Exchange (LME) has updated the indicative penalties for members found guilty of misconduct, the exchange announced on Wednesday.
Examples of such conduct might include a failure to adhere to lending guidance, or passing off non-LME contracts as LME. These breaches could result in a fine of 100,000 pounds and upwards.
If it is found that members have not controlled internal affairs, such as adequate training, or have not kept proper records, a fine would be levied. An isolated case may constitute a minor fine of 30,000 pounds, while a more systemic failure could warrant a higher penalty of 150,000 plus.
A member which has not operated in an open or co-operative manner could see a fine of 30,000 pounds for a minor breach, or for a more than 100,000 pounds for a more serious offence.
Abusive behaviour in regards to conduct of business and treatment of clients would fall under several categories depending on the different levels of intention/knowledge. If a person deliberately harms a clint the fine would start at 200,000 pounds. If the action is "reckless" or "negligent" the fine would begin at 100,000 pounds and 50,000 pounds, respectively.
Any conduct likely to cause a degradation of LMEselect would result in an indicative fine of 40,000 pounds.
Exerting undue influence on market prices would result in an indicative fine of 100,000 pounds, while a wash trade – for example an attempt to post an unrepresentative price in the mark to affect the official or closing price – could result in a fine of 50,000 and up.
Failure to comply with requirements relating to entry of trades into the trading and matching systems set out in the rules comes with an indicative fine of 2,000 pounds for the first offence, 5,000 pounds for the second offence, and 10,000 pounds for each offence thereafter within a 24 month rolling period.
Late input of trades could incurr an indicative fine of 1,000 pounds for the first offence, 2,000 pounds for the second offence, and 5,000 pounds for each offence thereafter within a 24 month rolling period.
While 5 errors or more in a calendar month in daily reporting of positions would see an indicative fine of 1,000 pounds for first offence, 2,000 pounds for a second offence, and 5,000 pounds for each offence thereafter within a 24 month rolling period. The same fines would be implemented in respect to option and warrant trades.
A delivery default would incur an indicative fine half-a-percent of the notional value of each lot which is the subject of a delivery default, subject to a minimum sanction of 100,000 pounds. This includes not only a failure to deliver on the due date, but also failures to meet relevant deadlines set out by the relevant Clearing House.
The LME takes any form of market abuse manipulation extremely seriously, it said in the note. Market abuse may constitute as a criminal offence and any suspected infringement would be referred without delay by the LME to the FCA. Given the seriousness of the offence, the LME does not considerate appropriate to prescribe an indicative fine for market abuse.
(Editing Tom Jennemann)