US investor sues three banks over silver price

Deutsche Bank - Foyer Bridge

HSBC, Deutsche Bank and the Bank of Nova Scotia have been accused of attempting to rig the price of silver in the latest price fixing scandal to rock the banking industry.

The banks are accused of conspiring to rig the daily global silver price in a similar way to the gold price fixing scandal, which led to Barclays being fined £26m.

An investor this weekend filed a lawsuit in New York claiming the banks unlawfully manipulated the price of the metal and its derivatives in order to "reap large illegitimate profits". The complainant, J Scott Nicholson of Washington DC, said: "The extreme level of secrecy creates an environment that is ripe for manipulation. Defendants have a strong financial incentive to establish positions in both physical silver and silver derivatives prior to the public release of silver fixing results, allowing them to reap large illegitimate profits."

Nicholson is seeking to bring a class action lawsuit representing many investors who have bought silver futures contracts since 2007. The silver price is set in London once a day via a conference call between the banks.

HSBC and Deutsche Bank declined to comment. A spokeswoman for Nova Scotia told Bloomberg: "We intend to vigorously defend ourselves against this suit."

Deutsche Bank is withdrawing from participating in setting gold and silver benchmarks in London on 14 August. Since March, a series of separate lawsuits have been filed, accusing banks of rigging the daily gold price. The banks named in those lawsuits have denied the allegations.

In May, the Financial Conduct Authority (FCA) fined Barclays £26m for failing to prevent manipulation of the gold price in London. The FCA also banned a Barclays trader, Daniel James Plunkett, from working in key roles in the City – for which he would need to be authorised – after he was tempted to make a "quick buck" from a client. Plunkett was fined £95,600.

Barclays was also fined £290m for rigging the Libor rate, an important bank interest rate that influences the cost of loans and mortgages.

City heavyweight Sir Richard Lambert is expected to be appointed this week to oversee a government-led investigation into financial markets in the wake of the scandals. Lambert, a former director general of the CBI, will, according to Sky News, be made an independent member of the fair and effective markets review, announced by the chancellor, George Osborne, last month.

Lambert will be one of three independent members of a practitioners' panel to be chaired by Elizabeth Corley, chief executive of Allianz Global Investors, one of the world's biggest fund managers. The other independent members, who will examine the panel's work, are expected to be Gay Huey Evans, a former Barclays executive and one-time chairman of the International Swaps and Derivatives Association, and Jonathan Moulds, a former head of Bank of America Merrill Lynch in Europe. The Treasury was unable to comment on the suggested appointments.

Moulds hit the headlines in 2012 when he loaned his £6.3m violin to a young London-based musician after being captivated by her playing. He lent the Stradivarius to Nicola Benedetti, 24, in exchange for her agreeing to perform for him and his friends a few times a year.

Powered by Guardian.co.ukThis article was written by Rupert Neate, for The Guardian on Sunday 27th July 2014 17.51 Europe/London

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