The London gold fixing is a pricing ritual that dates back over a century, but regulators are probing the practice to gain further understanding on how the fixing is conducted and whether manipulation was present. The Financial Conduct Authority (FCA) has been visiting each participating member bank in order to evaluate practices.
Barclays, one of the four participating banks, just received a fine for £26 million from the FCA for price manipulation in the gold market. The British regulator said that a trader exploited a weakness in the system to profit at a client’s expense, a clear conflict of interest. The trader has been fired and fined £96,500.
What is even more shocking is that this manipulation occurred just one day after Barclays was fined for £290 million in its involvement for attempting to rig the London Interbank Offer Rate (LIBOR). Two wrongs don’t make a right, but the client must feel much better now because Barclays “very much regrets the situation.”
The FCA said Barclays failed to manage conflicts of interest between the institution and its clients. Due to the rouge nature, the regulator did not force Barclays to make the £2.3 million loss whole for one of their clients, but the client was fully compensated.
Tracey McDermott, the director of enforcement and financial crime at the FCA, 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.” Barclays is just one of several institutions called out for a lack of internal controls and proper risk management.