FCA fines Barclays £26m for Gold Fixing misconduct

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Bank and precious metal director fined for failings dating to 2003.

The Financial Conduct Authority has today fined Barclays bank £26 million and one of its former precious metals directors £95,600 for failings and misconduct relating to the London Gold Fix.

The FCA said the bank was fined for "failing to adequately manage conflicts of interest between itself and its customers as well as systems and controls failings, in relation to Gold Fixing. These failures continued from 2004 to 2013".

The fine follows accusations from COMEX trader Kevin Maher who, in March this year, filed a report that the five banks tasked with setting the London benchmark gold price – Societe Generale, Deutsche Bank, Barclays, Bank of Nova Scotia and HSBC – had colluded to manipulate prices for profit in a large scale fraud plot.

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According to today’s FCA announcement, former Barclays Precious Metals Desk director Daniel James Plunkett exploited weaknesses in Barclays’ systems and controls to seek to influence the 3pm Gold Fix on June 28 2012, thereby profiting at a customer’s expense. It said the case was "particularly serious because he preferred his interests over those of a customer and his actions had the potential to have an adverse effect on the Gold Fixing and the UK and international financial markets".

As a result of Plunkett’s actions, Barclays was not obligated to make a US$3.9m (£2.3m) 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 also fined his employer Barclays for breach of Principles 3 and 8 of the FCA’s Principles for Businesses, in relation to the Gold Fixing. Between June 7 2004 and March 21 2013, Barclays was found to have breached Principle 3 by failing to take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems. In particular, Barclays failed to create or implement adequate policies or procedures to properly manage the way in which Barclays’ traders participated in the Gold Fixing; provide adequate specific training to precious metals desk staff in relation to their participation in the Gold Fixing; and create systems and reports that allowed for adequate monitoring of traders’ activity in connection with the Gold Fixing.

Barclays and Plunkett agreed to settle at an early stage, qualifying for a 30% discount to their respective fines. Without this, Barclays’ fine would have been £37,190,800 and Plunkett’s fine would have been £136,600.

Tracey McDermott, the FCA’s director of enforcement and financial crime, said: "A firm’s lack of controls and a trader’s disregard for a customer’s interests have allowed the financial services industry’s reputation to be sullied again. Plunkett has paid a heavy price for putting his own interests above the integrity of the market and Barclays’ customer. 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.

"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."

Since joining the Gold Fixing on 7 June 2004, Barclays has contributed to setting the price of gold in the Gold Fixing. The Gold Fixing is an important price-setting mechanism which provides market users with the opportunity to buy and sell gold at a single quoted price.

The FCA added that it is engaging with UK benchmark administrators, including The London Gold Market Fixing Limited, regarding their plans to assess compliance with IOSCO principles.
 

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