Merrill Lynch fined for violating cotton-speculation limits

Posted Dec. 07, 2011, at 7:20 p.m.

WASHINGTON — A key financial regulator said Wednesday that it had fined Wall Street powerhouse Merrill Lynch $350,000 for violating rules that limit how many speculative contracts it can hold in markets where bets are made on the price of cotton for future delivery.

The Commodity Futures Trading Commission said Merrill Lynch Commodities Inc., a subsidiary of Bank of America Corp., repeatedly had violated limits on how many Cotton No. 2 futures contracts it was allowed to hold. Futures are bets on what the price of a given commodity will be for future delivery.

In a technical news release, the agency said Merrill Lynch Commodities had violated a prohibition “against trading in excess of speculative position limits.” The violations reportedly occurred from Jan. 31 to Feb. 3. In the commission’s order, made public Wednesday, the agency said Merrill Lynch Commodities was notified that it had exceeded speculative limits on Feb. 1, Feb. 2 and Feb. 3, and didn’t come into compliance until Feb. 4.

Houston-based Merrill Lynch Commodities was found to be hundreds of contracts over its speculative limits in the categories of “all months” and “single month.” The most egregious example came Feb. 1, when the firm was 1,059 contracts over its 5,000 “all months” limit.

Analysts contend that a $350,000 fine is hardly a deterrent for Merrill Lynch Commodities. It’s well below the $12 million the commission levied on Dairy Farmers of America Inc. and its former CEO, Gary Hanman, in December 2008 for market manipulation and violating speculative limits. Merrill Lynch Commodities doesn’t disclose its revenues, but its parent company, Merrill Lynch & Co., li sted physical commodity assets valued at $447 million as of Sept. 30 in a recent regulatory filing.

California man pleads in NY insider trading case

NEW YORK — A former employee of a California semiconductor company pleaded guilty to an insider trading charge Wednesday in a probe of corruption in the expert networking industry, admitting that he tipped hedge funds about his company’s financial condition.

Stanley Ng, 43, of Cupertino, Calif., entered the plea in U.S. District Court in Manhattan to a single conspiracy charge, saying he shared inside information in late 2007 and 2008 while working at Santa Clara, Calif.-based Marvell Technology Group Ltd.

“At the time I did this, I knew it was illegal, wrong to share that information,” Ng told Judge Jed S. Rakoff.

He said he gave the secrets to Winifred Jiau, who is serving a four-year prison sentence after her conviction in an insider-trading probe that focused on Wall Street consultants who put public company employees willing to divulge secrets about earnings and mergers in conversations with hedge fund managers. Authorities said illegal secrets were passed off as the fruits of legitimate research.

Simpler credit card agreement gets a tryout

WASHINGTON — A simpler credit card agreement is getting a tryout.

The Consumer Financial Protection Bureau on Wednesday released a prototype of a credit card agreement that’s written in plain English. The idea is to sweep away the legalese and make it easier for consumers to understand a card’s costs and terms.

The agency is asking for the public’s feedback on the form, which can be found at:

www.consumerfinance.gov/credit-cards/knowbeforeyouowe.

For now, there are no plans to require credit card companies to adopt the form. But if the agency moved to make the form mandatory once its testing phase is over, it could establish an industrywide template that helped consumers comparison shop.

As it stands, the Consumer Financial Protection Bureau noted that the average credit card agreement runs 5,000 words and is packed with fine print that consumers don’t understand. The prototype agreement, by contrast, is just over 1,000 words and is broken down into three key sections — costs, changes and additional information.

The form will be tested over the first half of 2012 with new credit card applicants at the Pentagon Federal Credit Union, one of the nation’s largest credit unions. Some applicants will get the existing version of the credit union’s card agreement so that the CFPB can compare consumer feedback.

House panel debates bill to limit lawmakers’ stock trades

WASHINGTON — A deeply divided House committee debated Tuesday whether to pass a high-profile bill that would prohibit members of Congress from buying and selling stocks based on non-public information they learn about through their work on Capitol Hill.

Several panel members, backed in part by the testimony of a Securities and Exchange Commission official, said the measure is not needed because existing laws and congressional ethics rules ban such action. They also said they worry that the bill, known as the Stop Trading on Congressional Knowledge (STOCK) Act, could be used to unfairly tarnish members.

“I’m concerned that this could become a witch hunt,” Rep. Carolyn McCarthy, D-N.Y., said during the two-hour Financial Services Committee hearing. “Members are not out to make a quick buck.”

The resistance prompted Rep. Tim Walz, D-Minn., a key co-sponsor of the legislation, to chastise his colleagues.

“If you think 9 percent approval rating is bad, drag it out and don’t do anything,” he said.

The hearing struck a very different tone from one held last week on two similar bills before a Senate committee. Members of the Senate Committee on Homeland Security and Governmental Affairs said the bills should be retooled and quickly passed to restore the public’s confidence in Congress.

The Senate and House measures would ban members and their staffs from trading on information they learn about as they craft legislation. They also would require that stock trades be reported within 90 days.

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