Bradt, Under Fire, Quits as Merc Chairman
The New York Mercantile Exchange, the leading oil futures exchange, began taking steps Friday to remove a cloud left by a federal investigation that resulted in the resignation of its chairman.
Merc Chairman William M. Bradt resigned after the Commodity Futures Trading Commission on Thursday sharply criticized his behavior. CFTC said Bradt acted inappropriately during an investigation of trading practices involving his business associates.
Officials at the Merc said they have reopened an examination of two trading incidents and will recommend reforms urged by the commission at a meeting next month.
Bradt will be replaced automatically by Vice Chairman Lou Guttman, Merc President Rosemary McFadden said.
While it cleared him of any criminal wrongdoing, CFTC said “Bradt’s conduct, in certain instances, appears to have been inappropriate for the chairman of an exchange.”
The commission’s report raised questions as to whether Bradt had influenced or attempted to influence the exchange’s investigations into allegations that a Bradt client, CRT Services Inc., and Bradt’s firm were involved in an alleged commission-splitting arrangement.
CFTC recommended further investigation of two alleged incidents of commission splitting, which is the acceptance of brokerage fees by a broker not involved in a trade. A third alleged case was dismissed.
“One of the investigations is presently under review, the other will be back under review and a third one has been closed,” McFadden said. The investigations involve separate incidents of alleged non-competitive trading.
Bradt was also alleged to have engaged in protracted negotiations with Kevin Conway, former Merc vice president for compliance, to start a new clearing firm.
The commission found that Conway “exposed NYMEX to at least the appearance of conflict of interest.”
CFTC said Bradt’s handling of the trading inquiry was inappropriate “because Bradt not only had a business relationship with CRT, the subject of the inquiry, but also was engaged in personal business discussions with Conway at the time of the investigation.”
The Mercantile Exchange has implemented or is in the process of implementing all the recommendations of the report, McFadden said, including the proposal that the Merc prohibit members from accepting rewards for service on its committees through commission-splitting schemes.
“As a result . . . the exchange will now have clear-cut guidelines and procedures for the board, members and staff,” Bradt said in a statement.
The former chairman will return to running his own trading business, McFadden said. “He intends to continue his own personal business,” she said.
