HomeBusinessBarclays hit by $361 million U.S. penalty for 'staggering' blunder

Barclays hit by $361 million U.S. penalty for ‘staggering’ blunder

September 30 (Reuters) – British lender Barclays (BARC.L) agreed on Thursday a $361 million fine with U.S. regulators for “staggering” failures that led it to oversell $17.7 billion worth of structured products, adding even more costs to a mistake that CEO CS made his first year. Venkatakrishnan has devastated.

The bank said after the London market closed on Friday that its own investigation led by outside lawyers into the error had also concluded, adding that it would consider individual responsibilities and whether any disciplinary action would be taken based on the findings. wage packages would be imposed.

Shares of Barclays closed 0.2% lower on the day.

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The behavior involved dates back to March of this year, when Barclays revealed that it had accidentally oversold complex structured and exchange-traded bonds, with about 75% cap of $20.8 billion on such sales it had with the Securities and Exchange. Commission had agreed.

The bank had not implemented any internal controls to track such transactions in real time, the SEC found.

“While we recognize Barclays’ efforts to identify, disclose and remedy this behaviour, the deficiencies in the control and scope of the behavior at stake here were simply staggering,” said Gurbir Grewal, director of the SEC Enforcement Division, in a statement.

Barclays will pay the fine without admitting or denying the SEC’s findings.

Barclays said the investigation found that the over-issuance occurred primarily due to failure to identify and escalate the effects of a change in issuer status and due to a decentralized structure for securities issuance.

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The error was not due to “a general lack of attention to controls by Barclays,” the bank said.

Buyers of the notes, which were considered “unregistered securities”, had the right to demand that Barclays repurchase the products at the original price plus interest. The bank took on a £1.3 billion charge in the second quarter to cover the cost of buying back the securities, hurting profits. read more

On Thursday, the SEC said Barclays had agreed to pay a $200 million civil fine for lapse of control. In addition, it agreed to pay disgorgement and interest in excess of $161 million, though the regulator said the additional costs were met through the tender offer.

While the SEC settlement helps draw a line under the incident, which was an embarrassment to Venkatakrishnan – known at the bank as ‘Venkat’ – it is still facing private disputes related to the incident. read more

Barclays has also yet to outline the ultimate cost of its so-called winding-up offer to buy back the securities it has mistakenly sold. The bank said Friday that the full financial impact would be “materially in line” with that disclosed in its half-yearly financial results, with further details in its third quarter results on Oct. 26.

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

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Under a previous enforcement arrangement Barclays agreed with the SEC in 2017, the bank was stripped of “known seasoned issuer” status, allowing it to sell notes in the United States with flexible filing requirements.

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

Given this requirement, the staff knew to closely monitor the actual offers and sales of securities against the number of registered offers and sales on a real-time basis, but the bank failed to put in place a mechanism to do so, it said. the SEC.

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

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

Our standards: The Thomson Reuters Trust Principles.

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