* SEC ruling 'arbitrary and capricious' - petition
* Challenge comes ahead of SEC ruling on BlackRock fund on
* Red Kite, Amrod and Luvata not parties to lawsuit
By Josephine Mason
NEW YORK, Feb 12 U.S. copper makers Southwire Co
and Encore Wire Corp are launching a legal challenge
against the U.S. Securities and Exchange Commission approval of
JPMorgan Chase & Co's physically backed copper exchange
traded fund (ETF).
The companies, which say the copper ETF will inflate prices
for the metal and distort supplies, filed a notice of appeal on
Tuesday asking the U.S. Court of Appeals in Washington D.C. to
review the SEC's Dec. 14 ruling that gave the go ahead for the
The companies contend the SEC's ruling was "arbitrary and
capricious, an abuse of direction, or otherwise not in
accordance with law or unsupported by substantial evidence,"
said the petition signed by their attorney Robert Bernstein with
law firm Eaton & Van Winkle LLP.
Legal action could further frustrate JPMorgan's efforts to
launch the JPM XF Physical Copper Trust, more than two years
after it first filed for approval.
It also comes less than two weeks before the U.S regulator
decides on another, similar fund, the iShares Copper Trust
planned by BlackRock Inc. The ruling is due on Feb. 22.
Spokeswomen for JPMorgan and the SEC declined to comment.
DOWN TO TWO
Southwire, North America's largest wire and cable maker, and
Encore Wire based in McKinney, Texas, will go it alone without
three other members of a consortium that tried unsuccessfully to
get the regulator to block the fund.
Major metals hedge fund and merchant, Red Kite, and two
other fabricators Luvata and AmRod are not parties to the
appeal, Bernstein told Reuters.
After an almost year-long struggle to get the SEC to reject
the fund, they may not have the appetite for a protracted and
potentially costly legal battle, market participants said.
Industrial users fear the funds would cut off supplies of
copper, used in electrical wiring and plumbing, and boost prices
since they will use physical copper cathode as collateral
against shares of the fund, effectively removing a chunk of
metal from the market.
In their defense, JPMorgan and BlackRock say such fears are
unfounded because the funds, which would effectively allow U.S.
retail investors to trade physical copper easily for the first
time, would be miniscule compared with the 20-million-tonne
In giving the green light, the SEC said it did not believe
the fund would affect supplies of metal for immediate delivery.
The U.S. bank has much riding on the launch as the big banks
that swept into trading commodities over the past decade look
for new ways to make money in the wake of the world financial
crisis and amid tighter regulations.