The traditional secrecy of Swiss bank accounts was challenged yesterday by the Commodity Futures Trading Commission, which accused a Swiss bank of violating American law by refusing to name its customers.
The CFTC filed an administrative complaint against the Banque Populaire Suisse in an effort to force the bank to name clients for whom it has placed orders for silver futures.
The Swiss bank has been one of the most active silver traders on the New York Commodity Exchange (Comex) where silver prices have doubled in recent months.
Acting on reports that a few big silver speculators were trying to artificially inflate prices, federal comodity regulators on Oct. 19 ordered all silver brokers to report the names of their customers and the size of their investments in silver.
Banque Populaire Swisse about two weeks ago told the CFTC it would not comply with the order because doing so would violate Swiss law.
In response, the CFTC yesterday began legal moves intended to make the Swiss bank either name its clients or get out of the American silver market.
The administrative complaint filed by the CFTC's enforcement division is the agency's first challenge to Swiss bank secrecy and its second attempt to force foreign investors to disclose their holdings in U.S. commodity markets.
"This issue has been with us for some time," said CFTC Chairman James Stone. "It is now time for it to be squarely resolved."
Calling the test case against Banque Populaire "of paramount importance to the Commission's regulatory function," CFTC Director of Enforcement John A. Field III said, "It is essential that foreign entities not be permitted to use domestic markets for trading purposes if they refuse to comply with lawful commission orders."
CFTC officials said the Swiss bank is the only commodity broker who refused to identify its silver customers.
The CFTC began investigating silver trading after prices jumped rapidly and it appeared that a few large speculators might be trying to "squeeze the market" and force up prices by placing orders for massive amounts of silver.
Although the CFTC is forbidden by law to identify commodity traders who are under investigation, trade reports have identified the big silver buyers as members of the family of the late H. L. Hunt, the Texas oil billionaire. a
Several members of the Hunt family were interviewed by CFTC officials about their silver investments, which at one time amounted to more than 75 percent of all the outstanding futures contracts to buy silver.
The Hunts reportedly were placing orders for silver futures through several commodity brokers. Whether Banque Populaire was one of them is not known.
The administrative complaint filed against the Swiss bank by the CFTC's enforcement division now goes to an administrative law judge who will hold a hearing on the charges.
The complaint asks the judge to order the bank to stop violating the commodity exchange act -- in other words, to file the report on holdings -- and to prohibit the bank from trading in any American commodity market.
If the administrative law judge upholds the CFTC's position, the bank can appeal to the federal courts.