In another recent example of enforcement action by the Financial Conduct Authority (FCA), Barclays Bank has been fined over £26 million for failings surrounding the Gold Fixing.

In addition, a former trader at Barclays has been fined for exploiting the weaknesses in Barclays’ systems and controls by influencing Gold Fixing and profiting at a customer’s expense. He was fined £95,600 and banned from performing any function in relation to any regulated activity. 

Barclays joined the Gold Fixing in June 2004, which is an important price-setting mechanism that provides market users with the opportunity to buy and sell gold at a single quoted price.

However, an FCA investigation found that Barclays’ actions in relation to the Gold Fixing had breached Principles 3 and 8 of the FCA’s Principles for Businesses.  

Between June 2004 and March 2013, Barclays 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 also breached Principle 8 by failing to adequately manage certain conflicts of interest between itself and its customers. In particular, Barclays failed to adequately manage the inherent conflict of interest that existed from Barclays participating in the Gold Fixing and contributing to the price fixed during the Gold Fixing, while at the same time also selling to customers options products that referenced, and were dependent on, the price of gold fixed in the Gold Fixing.

These failings led to an increased risk of inappropriate conduct by Barclays’ traders participating in the Gold Fixing.

Both Barclays and the individual trader 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 the trader’s fine would have been £136,600.

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This blog post is intended as a news item only – no connection between Lewis Nedas and the parties concerned is intended or implied.