23 May 2014
The Financial Conduct Authority (FCA) has fined Barclays Bank Plc (Barclays) £26,033,500 for fixing the gold price.
Barclays failed to adequately manage conflicts of interest between itself and its customers as well as systems and controls failings, in relation to gold fixing, according to the FCA. These failures continued from 2004 to 2013.
On 28 June 2012, former Barclays trader Daniel James Plunkett exploited the weaknesses in Barclays’ systems and controls to seek to influence that day’s 3:00 p.m. gold fixing and thereby profited at a customer’s expense.
The FCA states that as a result of Plunkett’s actions, Barclays was not obligated to make a US$3.9m payment to its customer, although it later compensated the customer in full. Plunkett’s actions boosted his own trading book by US$1.75m (excluding hedging).
The FCA fined Plunkett £95,600 and banned him from performing any function in relation to any regulated activity.
The FCA's director of enforcement and financial crime, Tracey McDermott, said: ‘We expect all firms to look hard at their reference rate and benchmark operations to ensure this type of behaviour isn’t being replicated. Firms should be in no doubt that the spotlight will remain on wholesale conduct and we will hold them to account if they fail to meet our standards.’
McDermott added that because of ‘a firm’s lack of controls and a trader's disregard for a customer's interests … the financial services industry’s reputation [has been] sullied again. … Traders who might be tempted to exploit their clients for a quick buck should be in no doubt - such behaviour will cost you your reputation and your livelihood.
‘Barclays' failure to identify and manage the risks in its business was extremely disappointing. Plunkett's actions came the day after the publication of our LIBOR and EURIBOR action against Barclays. The investigation and outcomes in that case meant that the firm, and Plunkett, were clearly on notice of the potential for conflicts of interests around benchmarks.