Barclays Fined Twice in One Day for Compliance Failures


By Alan Katz

Barclays Plc (BARC) was fined twice in one day for client account failures in the U.K. and the U.S., hurting the bank’s effort to rehabilitate a tarnished image. It agreed to pay a total of $77 million in penalties.

The bank will pay $15 million to the Securities and Exchange Commission to settle claims that its U.S. wealth-management business failed to maintain an adequate internal compliance system and made trades and charged commissions without client approval.

In the U.K., Barclays agreed to pay 38 million pounds ($62 million) to Britain’s market regulator for failing to properly protect 16.5 billion pounds of client assets between 2007 and 2012. Flaws in account naming or data suggested assets belonged to Barclays instead of its clients, which could have caused customers to lose money if the bank became insolvent, the Financial Conduct Authority said.

“We have no doubt that Barclays is striving to enhance compliance and creating a culture that avoids these kinds of issues,” said Christopher Wheeler, a London-based analyst at Mediobanca SpA who has a neutral rating on Barclays shares. “This will come with a cost. In the meantime, the bank has to continue to suffer the reputational damage these fines cause.”

Chief Executive Officer Antony Jenkins, 53, has been trying to restore investor and regulator confidence in the lender since he took over as chief executive officer in 2012. A Libor rate-rigging scandal cost the bank 290 million pounds in fines and triggered the ouster of Robert Diamond, Jenkins’ predecessor.

Proving Difficult

It’s proving difficult. The lender was fined 26 million pounds in May by the FCA for control failings over its setting of gold prices. In the U.S., the bank is fighting New York Attorney General Eric Schneiderman’s allegations that it misled customers of its private-trading venue, or dark pool.

Chirantan Barua, an analyst at Sanford C. Bernstein Ltd., estimated the lender may have to pay 900 million pounds this year to settle probes into alleged manipulation of currency markets and into its dark pool.

Barclays has also set aside more than 1.6 billion pounds to compensate customers who were sold insurance they didn’t need or interest-rate swaps that lost them money.

“Legacy issues still have a significant impact on our business,” Jenkins said June 30 on the company’s second-quarter earnings call. “We are working to resolve them as quickly as possible.”

In the SEC case, London-based Barclays made more than 1,500 transactions for client accounts without providing required written disclosures or getting consent, the regulator said. It also earned revenue and charged commissions that didn’t match disclosures for 2,785 clients, the agency said.

Lehman Purchase

Barclays experienced rapid growth after acquiring Lehman Brothers Holdings Inc.’s wealth-management business in September 2008 and its compliance procedures didn’t keep pace with the expansion, the SEC said.

“Barclays failed to establish this critical compliance foundation when it acquired Lehman’s advisory business, and as a result subjected its clients to a host of improper practices and inadequate disclosures.” Julie Riewe, co-head of the asset management unit in the SEC’s enforcement division, said in a statement.

Barclays earned extra revenue of $3.1 million from its actions and caused client losses and overcharges of $472,000, the SEC said. The bank has since reimbursed or credited affected clients a total of about $3.8 million, the agency said.

‘Fully Cooperated’

“Barclays has fully cooperated with the SEC throughout this examination,” the bank said in an e-mailed statement. “We have since strengthened our supervisory and control environment and remain committed to providing the best solutions and results for our clients worldwide.”

In the U.K. decision, the FCA said Barclays failed to properly apply the regulator’s rules when opening 95 custody accounts in 21 countries. Barclays took eight months to identify these accounts after failing to notice it was in breach of the rules for at least three years, the FCA added.

“Barclays fell short of what is expected” by regulators, the bank said in its statement. “Barclays has subsequently enhanced its systems to resolve these issues.”

The lender was fined 1.1 million pounds in 2011 for similar violations. While clients didn’t lose money, they were put at risk of losses, Britain’s market watchdog said at the time.

“Barclays failed to apply the lessons from our previous enforcement actions,” Tracey McDermott, FCA director of enforcement and financial crime, said in a statement.

Barclays shares fell 2.4 percent to 229.25 pence in London, valuing the lender at 38 billion pounds. They have dropped 16 percent this year, making Barclays the worst performer among Britain’s five largest banks.

To contact the reporter on this story: Alan Katz in Washington at [email protected]

To contact the editors responsible for this story: Sara Forden at [email protected] Jesse Westbrook, Gregory Mott



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