RegulationMay 23 2014

FCA fines Barclays £26m and trader banned

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Barclays has been mired in another regulatory scandal after being hit with a substantial £26m fine relating to its failure to manage conflicts of interest over a nine-year period during which it was involved in setting global gold prices.

The regulator also said that a former trader at the bank, Daniel James Plunkett, “exploited the weaknesses in Barclays’ systems and controls” on one day in June 2012 to make a $1.75m gain at the expense of a customer.

The FCA has fined Mr Plunkett £95,600 and banned him from performing any function in relation to any regulated activity.

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

The fine is the latest embarrassment for Barclays, which has been trying to clear its reputation under new chief executive Antony Jenkins.

In September 2012 it was fined a then record £59.5m, part of a package of £290m of penalties from UK and US regulators for manipulating the London interbank offered rate and Euro interbank offered rate.

In summer last year it was hit with further £300m in civil penalties for manipulating electric energy prices, while last September it revealed it was contesting a £50m fine from the FCA over recapitalisation deals with the Qatari sovereign wealth fund in 2008.

Since joining the gold fixing on 7 June 2004, Barclays has contributed to setting the price of gold in the ‘gold fixing’, which involves a number of banks agreeing on the price for gold every day.

On 28 June 2012 Mr Plunkett sought to influence that day’s 3:00pm gold fixing and thereby profited at a customer’s expense after placing a trade of $3.9m, according to the FCA.

Although Barclays was not obligated to make a $3.9m payment to its customer, it later compensated the customer in full.

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.”