Issue link: http://resourceworld.uberflip.com/i/355430
A U G U S T / S E P T E M B E R 2 0 1 4 www.resourceworld.com 27 O n the evening of June 27, 2012, a director on Barclays' precious met- als desk, Daniel Plunkett, emailed some of his colleagues telling them he hoped for a "a mini puke to $1,558 for fixing" the next afternoon, meaning a drop in the gold price on the 3 pm London gold fix. The email came to light as part of a subsequent investigation by the UK Financial Conduct Authority (FCA). Plunkett was responsible for pric- ing and managing Barclays' risk on a digital exotic options contract; if the 3 pm London gold fix surpassed $1,558.96 per ounce (the Barrier) on June 28 2012, then Barclays would have to pay "Customer A" $3.9 million through this contract. "During the 3 pm gold fixing on 28 June 2012, Plunkett placed certain orders with the intent of increasing the likelihood that the price of gold would fix below the Barrier, which it eventually did. As a result, Barclays was not obligated to make the $3.9 million payment to its customer, and Plunkett's book profited by $1.75m (exclud- ing hedging)," the FCA said in a release on May 23. That afternoon's fix stood at $1,558.50 per ounce, just under the Barrier. Sensing that something was amiss, Customer A requested an explanation from Barclays, which then passed on the client's concerns to Plunkett on June 28 and 29, 2012. "He failed to disclose that he had placed orders and traded during the gold fixing. Further, Plunkett misled both Barclays and the FCA by providing an account of events that was untruthful," the FCA said. Barclays was eventually fined just over £26 million ($44 million) by the FCA in May this year, while Plunkett was fined £95,600. He is now prohibited "from performing any function in relation to any regulated activities", the authority said. "We very much regret the situation that led to this settlement," Barclays group chief executive Antony Jenkins said in a release dated May 23. "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 fine's scale was based on series of predetermined criteria. "Fine sizes are calculated in a way that's laid out in our rules," FCA press officer Lara Joseph told Resource World. "This reflects things like the period of time malpractice went on for, how much money was made from it and whether there were any mitigating factors. For example, was it done by accident or was it purposeful?" The incident has certainly added fuel to various gold manipulation theories and claims. In the US, lawsuits have also been launched alleging attempted manipula- tion by London gold fix's member banks and Deutsche Bank (which withdrew its participation from the fix in mid-May). But others argue that the system, while not perfect, is proven and still robust; they support reform and moves are already being made in this regard. The fix after the fine by Simon Rees