New York, NY – April 29, 2010 – The U.S. Commodity Futures Trading Commission (CFTC) today announced a settlement with Moore Capital Management, LP, Moore Capital Advisors, LLC, and Moore Advisors, Ltd. stemming from allegations of market manipulation and supervisory failures. While the charges were levied against the entities, the manipulative actions were carried out by a former portfolio manager, identified as David Baum.
The CFTC alleges that, between November 2007 and May 2008, Baum engaged in “banging the close,” a practice designed to artificially inflate the settlement prices of platinum and palladium futures contracts on the New York Mercantile Exchange (NYMEX). The alleged scheme involved placing orders specifically timed to exert upward pressure on the closing prices of the contracts.
Moore Capital, as a whole, was also cited for failing to adequately supervise Baum’s trading activities and for lacking sufficient internal policies and procedures to detect and prevent such violations. The CFTC order found that the firm did not diligently oversee the former PM’s trading.
As a result of the settlement, Moore Capital Management, Moore Capital Advisors, LLC, and Moore Advisors, Ltd. will jointly pay a $25 million civil monetary penalty. Additionally, their registrations as Commodity Pool Operators and Commodity Trading Advisors will be restricted for three years. The firms are also subject to a two-year trading restriction, prohibiting them from trading within 15 minutes of and during the closing period of the platinum and palladium futures and options markets.
The CFTC order mandates that Moore Capital implement a policy requiring the recording, maintenance, and review of specific non-equity trade-related communications. They must also submit a compliance report to the CFTC and distribute the order to all current and future employees, principals, and officers. The CFTC acknowledged Moore Capital’s cooperation throughout the investigation.
The CME Group (NYMEX) provided assistance to the CFTC during the investigation.
Source: CFTC.gov
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