In 2014, Britains Barclays Plc was punished and fined 26 million pounds by the UK Financial Conduct Authority. It was alleged that former Barclays trader Daniel James Plunkett had manipulated gold prices.

Carefully, research and outline what this scandal involved, and explain why the actions of the former Barclays trader were unethical. You should where possible relate these actions to the CFA Professional Standards and Code of Ethics.

Discuss what issues may have caused this behaviour to occur, and what you could implement to prevent this from happening in the future.

Evaluate the impact of this scandal on the value of Barclays and explain why the value of the bank may change by more than the cost of the fines to correct the issue.

Note: Please research and answer in detail thanks. Can refer to the structure and content of the answer in the picture, thanks.

News

Barclays Bank has been fined 26m by UK regulators after one of its traders was discovered attempting to fix the price of gold.

The trader, who has been sacked, exploited weaknesses in the system to profit at a customer's expense, the Financial Conduct Authority (FCA) said.

The incident occurred in June 2012, the day after the bank was fined a record 290m for attempting to rig Libor.

Barclays said it "very much regrets the situation" that led to the fine.

The FCA found the bank failed to "adequately manage conflicts of interest between itself and its customers", in relation to fixing the price of gold.

"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," said Antony Jenkins, group chief executive.

The FCA also fined the trader, Daniel James Plunkett, 96,500.

"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," said Tracey McDermott, the FCA's director of enforcement and financial crime.

"Barclays' failure to identify and manage the risks in its business was extremely disappointing."

Barclays and Mr Plunkett agreed to settle at an early stage, thereby qualifying for a 30% discount on their fines.

Fake orders

Mr Plunkett was a director on the precious metals desk.

He was responsible for pricing and managing Barclays' risk on a contract that was specifically linked to the price of gold at 3:00p.m. on 28 June 2012.

If the gold price was above $1,558.96 (925.57) at that time then Barclays would be required to make a payment of $3.9m to its customer.

But if the price was below that benchmark Barclays would not have to make the payment.

Mr Plunkett created fake orders with the intent of pushing the price of gold below $1,588.96, which he succeeded in doing.

The result was Barclays was not obligated to make the $3.9m payment to its customer, and Mr Plunkett booked a profit of $1.75m for the bank.

When the customer learned of this, an explanation was sought from Barclays. The concerns were then relayed to Mr Plunkett on 28 and 29 June 2012.

The FCA said he misled both Barclays and the regulator by providing a false account of events and failing to admit that he had placed the fake orders.

Gold Fixing is a price setting mechanism that allows investors to buy and sell gold at a single quoted price.

Barclays joined the mechanism in 2004. The other members are HSBC, Societe Generale and Scotiabank. Deutsche Bank was part of the group but has since left.

Part A: The Wells Fargo (WFC) saga came under the spotlight in 2016. The scandal mainly consisted of 2 unethical actions. The first action included the opening of over 1.5 million unauthorized deposit accounts, being executed without customers' knowledge and consent (Corkery 2016). Customers' savings from existing accounts were shifted to these unauthorized accounts (Corkery 2016). From there, customers would incur miscellaneous fees such as overdraft fees because there were inadequate savings in their bank accounts. (Corkery 2016). Furthermore, there were applications for 565433 credit card accounts being made (Corkery 2016). With this, miscellaneous fees were also being charged such as annual fees and interests, which accumulated a whopping $400000 fees in only 14000 accounts (Corkery 2016). Therefore, these actions signified Wells Fargo's intent to to maximize their profit gains through unethical means. Corporate citizenship symbolizes that a company produces higher standards of living and quality of life for the communities around them and maintains profitability for stakeholders (Hayes n.d). WFC has pledged itself to practice corporate social responsibility in its operations (Wells Fargo n.d). However, WFC failed to live up to its corporate social responsibility image dutifully as a result of this scandal. The company's actions were unethical because it led to conflict of interests. Profit interests were attained at the expense of stakeholders' interests. WFC failed to disclose crucial information on why additional credit cards were issued to their customers (McGrath 2016). Furthermore, when customers discovered, the company told customers to simply dispose of the credit cards without any formal investigations executed (Corkery 2016). As such, the company robbed their customers of by resorting to such fraudulent activities, hoping not to get caught in the long run. Such hidden actions have caused a major impact on their customers' interests and investors who have held equity interests. The bank also gambled on huge regulatory risk because of intense scrutiny surrounding financial service companies since the great recession happened (Kemeny n.d). arks Overaggressive goals set by the top management hierarchy together with employees' pressure were the main drivers behind the scandal. Managers were pushing employees to attain unrealistic sales targets in cross selling through a reward and punishment system (Kouchaki 2016). Moreover, employees were willing to resort to unethical actions for the interest of their business because of fears regarding their job security and loss of essential income to support families (McCombs School of Business n.d) If i was managing WFC in a high hierarchy position, I would outline a mandatory business ethics training program, complemented with a code of conduct for leaders to be catered to all WFC's staff. This training should emphasize on internal corruption and include induction training for all new employees and existing staff to ensure all officers are able to identify imminent suspicious or corrupt activities. This is especially vital given that 5,300 employees were fired from the incident due to unethical practices (Coleman 2019). Next, I would suggest setting up a finance monitoring system. Compliance and finance officers will enforce and follow a series of systematic procedures in analyzing financial statements. Independent auditors would be hired to scrutinize business credit flows with respect to business' progress overtime. Financial analysis undertaken would provide a reliable and credible financial transparency with proper disclosure of activities to government officials and potential investors concerned. Therefore, this system would obligate stakeholders to make better contributions to the society ethically. Part B: Being wary of another repeat, the Federal Reserve System (Fed) imposed restrictions on WFC in 2018 (Magana 2020). The Fed strictly capped the bank to $1.95 trillion in assets until it solved its internal management and controls amid the post scandal controversies and speculation (Egan 2018a). it was estimated that WFC lost over $220 Billion in Market Value Under Fed Cap (Levitt 2020). This is because the cap had dampened the bank's willingness and ability to issue loans and enroll customers (Levitt 2020). Regulators were unsatisfied with the bank's leaders because reform plans were not materializing. Subsequently, the bank hired a new CEO Charlie Scharf to offer renewed hope. However, Mr. Scharf realized otherwise because of the massive uncertainty regarding the bank's reform developments. The cap imposed had since caused the firm's market value to change beyond the cost of the fines. The scandal had largely tarnished the bank's image and reputation, which caused severe loss of confidence and trust among consumers (Egan 2018b). Hence, the market value of WFC would be poised to decrease further if uncertainty about the bank's implementation of its reforms drags on. Part A: The Wells Fargo (WFC) saga came under the spotlight in 2016. The scandal mainly consisted of 2 unethical actions. The first action included the opening of over 1.5 million unauthorized deposit accounts, being executed without customers' knowledge and consent (Corkery 2016). Customers' savings from existing accounts were shifted to these unauthorized accounts (Corkery 2016). From there, customers would incur miscellaneous fees such as overdraft fees because there were inadequate savings in their bank accounts. (Corkery 2016). Furthermore, there were applications for 565433 credit card accounts being made (Corkery 2016). With this, miscellaneous fees were also being charged such as annual fees and interests, which accumulated a whopping $400000 fees in only 14000 accounts (Corkery 2016). Therefore, these actions signified Wells Fargo's intent to to maximize their profit gains through unethical means. Corporate citizenship symbolizes that a company produces higher standards of living and quality of life for the communities around them and maintains profitability for stakeholders (Hayes n.d). WFC has pledged itself to practice corporate social responsibility in its operations (Wells Fargo n.d). However, WFC failed to live up to its corporate social responsibility image dutifully as a result of this scandal. The company's actions were unethical because it led to conflict of interests. Profit interests were attained at the expense of stakeholders' interests. WFC failed to disclose crucial information on why additional credit cards were issued to their customers (McGrath 2016). Furthermore, when customers discovered, the company told customers to simply dispose of the credit cards without any formal investigations executed (Corkery 2016). As such, the company robbed their customers of by resorting to such fraudulent activities, hoping not to get caught in the long run. Such hidden actions have caused a major impact on their customers' interests and investors who have held equity interests. The bank also gambled on huge regulatory risk because of intense scrutiny surrounding financial service companies since the great recession happened (Kemeny n.d). arks Overaggressive goals set by the top management hierarchy together with employees' pressure were the main drivers behind the scandal. Managers were pushing employees to attain unrealistic sales targets in cross selling through a reward and punishment system (Kouchaki 2016). Moreover, employees were willing to resort to unethical actions for the interest of their business because of fears regarding their job security and loss of essential income to support families (McCombs School of Business n.d) If i was managing WFC in a high hierarchy position, I would outline a mandatory business ethics training program, complemented with a code of conduct for leaders to be catered to all WFC's staff. This training should emphasize on internal corruption and include induction training for all new employees and existing staff to ensure all officers are able to identify imminent suspicious or corrupt activities. This is especially vital given that 5,300 employees were fired from the incident due to unethical practices (Coleman 2019). Next, I would suggest setting up a finance monitoring system. Compliance and finance officers will enforce and follow a series of systematic procedures in analyzing financial statements. Independent auditors would be hired to scrutinize business credit flows with respect to business' progress overtime. Financial analysis undertaken would provide a reliable and credible financial transparency with proper disclosure of activities to government officials and potential investors concerned. Therefore, this system would obligate stakeholders to make better contributions to the society ethically. Part B: Being wary of another repeat, the Federal Reserve System (Fed) imposed restrictions on WFC in 2018 (Magana 2020). The Fed strictly capped the bank to $1.95 trillion in assets until it solved its internal management and controls amid the post scandal controversies and speculation (Egan 2018a). it was estimated that WFC lost over $220 Billion in Market Value Under Fed Cap (Levitt 2020). This is because the cap had dampened the bank's willingness and ability to issue loans and enroll customers (Levitt 2020). Regulators were unsatisfied with the bank's leaders because reform plans were not materializing. Subsequently, the bank hired a new CEO Charlie Scharf to offer renewed hope. However, Mr. Scharf realized otherwise because of the massive uncertainty regarding the bank's reform developments. The cap imposed had since caused the firm's market value to change beyond the cost of the fines. The scandal had largely tarnished the bank's image and reputation, which caused severe loss of confidence and trust among consumers (Egan 2018b). Hence, the market value of WFC would be poised to decrease further if uncertainty about the bank's implementation of its reforms drags on