Barclays fined £26m for gold fix failings

Financial Conduct Authority fines Barclays and bans former trader from City over failings in role in gold price setting

Barclays has been fined £26m, and one of its former traders banned from working in the City, for failing to prevent manipulation of the gold price in London.

Almost two years after being hit with a £290m fine for rigging the Libor rate, Barclays is now facing the wrath of regulators again, this time for almost 10 years of inadequate oversight of the setting of the price of gold, known as the fix.

Barclays' chief executive, Antony Jenkins, who was promoted to replace Bob Diamond in the wake of the Libor rigging scandal, insisted the bank was already making changes to its culture to avoid such problems happening again.

The Financial Conduct Authority (FCA) said it had fined Daniel James Plunkett £95,600 and banned him from working in key roles in the City – for which he would need to be authorised – after he was tempted to make a "quick buck" from a client.

His actions took place on 28 June 2012, the day after the announcement of the bank's Libor fine unleashed a furious public reaction that led to the creation of the parliamentary commission on banking standards.

The Bank was fined for failing to have systems and controls in place over the gold price fix between 2004 and 2013.

Plunkett had a role in the arcane business of monitoring the bank's risk on a "digital exotic options contract" that was based on the price at the gold fix at 3pm. On the day in question, if the price had fixed at $1,558.96, Barclays would have had to make a payment to a customer, so Plunkett placed orders "with the intent of increasing the likelihood that the price of gold would fix below" the price. This meant Barclays avoided having to pay its customer $3.9m (£2.3m), and Plunkett's book profited by $1.75m.

Plunkett, a director on the precious metals desk, sent an email on the evening of 27 June 2012 telling colleagues that he was hoping for a "mini-puke to 1558", a mini-puke referring to a fall in the gold price.

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."

The Barclays customer complained, and the FCA said Plunkett – who was paid £284,000 in a year – failed to disclose that he had placed orders and traded during the gold fix. He also misled both Barclays and the FCA by providing an account of events that was untruthful. The customer was repaid.

The price of gold is fixed twice a day at 10.30am and 3pm and is regarded as important as it allows the commodity to be bought and sold at a single price. Members of a panel set the price during a conference call, which begins with the chair using the current price – known as the spot price – as a starting point. The chair then asked if others have any orders to buy or sell, which begins the process of setting the fix price.

At the start of the 3pm fix on 28 June, the chair had started the price at $1,558.50 but it then dropped to $1,556 before increasing again to $1,558. Plunkett placed very large orders with Barclays's representative on the fixing panel. He then withdrew them and placed them again, which the FCA said had the impact of influencing the price.

Jenkins said: "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."

The bank said the FCA acknowledged that it had brought the conduct of the former trader promptly to the attention of its predecessor, the Financial Services Authority, and that it also fully co-operated with the FCA's investigation.

Jenkins took the helm at Barclays in September 2012, and the FCA found that bank did not have any systems in place to record orders by traders during the gold fix until February 2013. The FCA said the bank should have placed more importance on this, particularly as it was reviewing its procedures as a result of the Libor fine.

Venerable tradition

The unfortunately named fixing of the gold price has been going on in London since 1919, at a process that until 10 years ago was chaired by investment bankers from NM Rothshild.

The meetings take place twice a day, at 10.30am and 3pm, when the chair announces an opening price to the other members of the fixing panel on a conference call. The price is relayed to their customers and, based on their orders, they instruct their representatives to declare themselves as buyers or sellers at that price. The "fix" is determined by balancing the orders.

Just four banks dial into the fix – Barclays, HSBC, Société Générale and Scotia – after Deutsche left last week.

A number of lawsuits have already been filed relating to alleged price manipulation. A source familiar with the Barclays fine said it was a one-off and not part of a wider investigation.

Barclays: a sorry tale

"We are truly sorry for what has happened and that you have been let down."

July 2012: then Barclays chairman Marcus Agius began what was to become a string of apologies by the bank in a public letter

"The industry, and Barclays, got it wrong on occasions. We were too aggressive, we were too short-term focused and too self-serving"

January 2013: after a series of management changes, new boss Antony Jenkins talks to an audience in Davos

"Trust is a very easy thing to lose, and a very hard thing to win back"

December 2013: Jenkins, as guest editor of the Today programme

"We get it. The world has changed, the industry must change, there is no going back to the way things were"

February 2014: Jenkins at a conference in Brussels

"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."

23 May 2014: Jenkins again returns to the theme


Jill Treanor

The GuardianTramp

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