The FCA has fined Barclays £26m for failings related to gold fixing and banned and fined a former trader £95,600.
The bank has been fined for failing to adequately manage conflicts of interest as well as systems and controls failings.
Former Barclays trader Daniel Plunkett tried to gain $1.75m (£1m) and cheat a customer out of millions through gold fixing. He was a director on the bank’s precious metals desk and was found to have exploiting weaknesses in Barclays’ systems on 28 June 2012 in order to profit at a customer’s expense.
Plunkett was responsible for pricing and managing Barclays’ risk on a digital exotic options contract which referenced the price of gold during the 3:00pm Gold Fixing on that day.
The US customer owning the option was due to receive a $3.9m (£2.3m) payment if the gold price fixed above $1,558.96 at that date and time.
In an email sent to colleagues on the evening of 27 June, Plunkett said he was hoping for “a mini puke to 1558 for fixing”. The FCA says the phrase “mini puke” is understood to mean a drop in the price of gold ahead of fixing at 3:00pm.
On the morning of 28 June, he told a colleague: “Hopefully we fix 1558, or 1558.75 ideal”.
Plunkett placed a number of orders that day which meant the price was fixed at $1558.50, just below the required level.
As a result, Plunkett boosted his own trading book by $1.75m.
Shortly afterwards the customer asked Barclays for an explanation of why the price had fixed just below the barrier.
Barclays conducted an international investigation into Plunkett’s actions and repaid the customer the amount that would have been due had the price fixed above the barrier.
The FCA found Barclays had inadequate policies and procedures in place to properly manage traders’ participation in gold fixing, and failed to provide adequate training to staff on gold fixing.
The regulator says the failings were particularly serious as its investigation into Libor and Euribor fixing should have caused Barclays to review its systems and controls in relation to other price-setting mechanisms. The FSA fined Barclays £59.5m for manipulating Libor and Euribor in June 2012.
The FCA says: “Indeed, this incident, which occurred the day after the authority published its final notice to Barclays in relation to Libor and Euribor, may have been avoided had Barclays done so.”
FCA director of enforcement and financial crime Tracey McDermott adds: “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.”
Barclays group chief executive Antony Jenkins says: “We very much regret the situation that led to this settlement. Barclays has undertaken a significant amount of work to enhance our systems and controls and is committed to the highest standards across all of our operations.
ADVISER VIEW: Alan Nedas
“The FCA has a very hard job to do in weeding out misconduct like this. Qualifications are one thing but competence and honesty are completely separate and, unfortunately greed often influences individuals’ behaviour.”
Alan Nedas is principal at Alan Nedas Associates
ADVISER VIEW: Alan Lakey
”There is still a lack of senior accountability. Senior people need to be punished to the extent of losing their jobs to shock banks into taking action.”
Alan Lakey is partner at Highclere Financial Services