Barclays fined US$361m for ‘appalling’ mistake

Sep 30 (Reuters) – British lender Barclays (BARC.L) on Thursday agreed to a $361 million fine with U.S. regulators over “staggering” failures that led it to oversell $17.7 billion worth of products structured, racking up additional costs for a mistake that spoiled CEO CS Venkatakrishnan’s first year in charge.

Shares of Barclays were up 2% in early trading on Friday after the news, and were last up 0.5% at 0846 GMT – broadly in line with gains made by the wider FTSE 100.

The conduct in question dates back to March this year, when Barclays revealed that it had accidentally oversold complex structured and exchange-traded notes, exceeding the $20.8 billion limit on such sales by around 75%, which it had agreed with the Securities and Exchange Commission.

The bank had no internal controls in place to track these transactions in real time, the SEC found.

“While we acknowledge Barclays’ efforts to identify, disclose and remedy this conduct, the oversight gaps and the extent of the conduct at issue here were simply staggering,” said Gurbir Grewal, Director of the Division of Enforcement. from the SEC, in a press release.

Barclays was not immediately available for comment on Friday. A Barclays spokesman, who neither admitted nor denied the SEC’s findings, declined to comment on Thursday.

Purchasers of the tickets, considered “unregistered securities”, had the right to demand that Barclays repurchase the proceeds at the original price plus interest. The bank took a charge of 1.3 billion pounds in the second quarter to cover the costs of buying back the securities, which weighed on its profits. Read more

On Thursday, the SEC said Barclays had also agreed to pay a $200 million civil penalty for the screening breaches. Additionally, he agreed to pay restitution and interest of more than $161 million, although the regulator said additional fees were met by the buyout offer.

Although the SEC settlement helps draw a line under the incident, which was embarrassing for Venkatakrishnan — known to the bank as “Venkat” — he still faces private litigation related to the incident. Read more

Barclays also has yet to expose the final costs of its so-called termination offer to repurchase the securities it sold in error. Venkat said at an investor event this month that he would do so in “a relatively short time.” Read more

Barclays said this month that investors had submitted claims for $7 billion of the $17.7 billion in securities it had oversold. Read more

WELL-INSURED ISSUER

In an earlier implementing settlement reached between Barclays and the SEC in 2017, the bank was stripped of its “well-known seasoned issuer” status that had allowed it to sell notes in the United States with flexible deposit requirements.

As a result, Barclays had to quantify the total number of securities it planned to offer and sell and prepay registration fees for such offerings. In August 2019, the bank and the SEC agreed that Barclays could offer or sell approximately $20.8 billion in securities, for a three-year period.

Given this requirement, staff knew they had to closely monitor actual bids and sales of securities against the amount of bids and sales recorded in real time, but the bank did not put a mechanism in place. to do so, the SEC said.

Around March 9, staff realized they had oversold the agreed amount of securities and alerted regulators a few days later, the SEC said.

(This story corrects title and clearly states that $361 million was the size of the penalty, not the payout, removes analyst’s comment)

Reporting by John McCrank in New York, Kanishka Singh in Washington and Iain Withers in London; edited by Deepa Babington and Jason Neely

Our standards: The Thomson Reuters Trust Principles.