Two Barclays entities on different sides of the Atlantic Ocean settled regulatory matters resulting in sanctions of over US $75 million.
In one action, Barclays Bank plc settled charges with the UK Financial Conduct Authority that alleged it failed adequately to follow requirements related to the protection of client assets. For this, Barclays agreed to pay a financial penalty of GBP 37,745,000 (US $61.3 million).
In the other action, Barclays Capital Inc. agreed to pay a fine of US $15 million to the US Securities and Exchange Commission and implement certain remedial measures for allegedly failing to maintain an adequate compliance system in connection with its wealth management business.
According to the FCA, from November 1, 2007, through January 24, 2012, Barclays Bank failed to maintain “adequate and effective organizational, control and risk management systems” regarding 95 external accounts where client custody assets were held with sub-custodians outside the Barclays Group, and did not “arrange adequate protection for, maintain its own books and records and perform its own reconciliations” related to approximately GBP 16.5 billion (US $26.8 billion) of client custody assets for which it was responsible.
FCA made clear that Barclays Bank’s failings were solely within its investment banking division. No other bank customers or operations were impacted.
FCA noted that, although Barclays Bank self-reported its failings, it did not detect its issues for over three years, and it took approximately eight months for the bank to identify the number of accounts in breach of requirements. FCA acknowledged, however, that no customers were harmed as a result of the bank’s issues and that the bank did not act “deliberately or recklessly.”
Separately, the SEC found that Barclays Capital did not adequately enhance the compliance system of its wealth management business after it acquired the private investment management business of Lehman Brothers in 2008. The SEC also claimed that the firm did not put in place adequate policies and procedures to prevent violations of relevant law and to keep certain required books and records.
Among other things, said the SEC, Barclays Capital engaged in certain principal transactions from January 2009 to December 2011 without making written disclosures and obtaining client consent, as required by law; charged commissions and fees and earned revenue from September 2008 through December 2011 that were not in accordance with client disclosures; and did not ensure that client funds and securities over which it had custody were subject to surprise examinations by an independent public account, as required by an SEC rule.
In agreeing to the settlement, the SEC acknowledged Barclays Capital’s cooperation and the prompt remedial actions it took after learning of its issues, as well as the reimbursement to customers of approximately US $3.8 million, including interest.
In addition to paying a fine, Barclays Capital agreed to retain an independent compliance consultant to review discrete aspects of the firm’s advisory business and issue recommendations, which the firm has committed to adopt unless unreasonable.