The UK’s City watchdog said as a result of the bank’s failings, former trader, Daniel James Plunkett, was able to exploit weaknesses in its systems to make a profit and avoid an obligation to pay a client $3.9m, (£2.3m, €2.8m).
Plunkett has also been fined £95,600 and banned from performing any regulated function.
The regulator said both Barclays and Plunkett had agreed to settle early and so qualified for a 30% discount, otherwise their fines would have been £37,190,800 and £136,600 respectively.
'Untruthful'
According to the FCA, on 28 June 2012, the day after the regulator handed its biggest ever fine to the bank for its involvement in the LIBOR fixing scandal, Plunkett, who was a director on the bank’s precious metals desk, was able to trade in such a way as to make a profit of $1.75m to his own book, while costing a customer $3.9m.
In his role, Plunkett was responsible for pricing and managing Barclays’ risk on a digital exotic options contract which referenced the price of gold during the 3pm gold fixing on the day in question.
The gold fixing is a price-setting mechanism which provides market users with the opportunity to buy and sell gold at a single quoted price.
On 28 June 2012, if the price fixed above $1,558.96 during the 3pm gold fixing, then Barclays would be required to make the $3.9m payment to its customer, however, if it was below that level, a payment would not need to be made and Plunkett would stand to make $1.75m (excluding hedging).
During the 3pm placing, Plunkett placed certain orders with the intent of increasing the likelihood that the price of gold would fix below the barrier, which it did. Plunkett was therefore able to make a personal profit and avoid paying out to the customer, although the client was later compensated in full.
Shortly after the conclusion of the 3pm gold fixing the FCA said the customer became aware that the price had been fixed just below the barrier and sought an explanation from Barclays as to what had happened. When Barclays then approached Plunkett that day and the day after, he failed to disclose that he had placed orders during the gold fixing.
The regulator added that Plunkett also misled both it and Barclays by providing an account of events that was untruthful.
Financial services reputation ‘sullied again’
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.”
Responding to the fine, Barclays’ group chief executive Antony 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.”
