NEWS | AMERICAS
Barclays agrees to pay US$361m to settle structured notes lapse
The UK bank was charged by the US securities regulator for the overissuances of structured notes and ETNs. affiliate in May 2017, Barclays bank lost its status as a well-known seasoned issuer (WKSI). ‘As a result, Barclays bank had to quantify the total number of securities that it anticipated offering and selling and pay registration fees for those offerings upon the filing of a new registration statement,’ it said.
The US Securities and Exchange Commission (SEC) has charged today (30 September) Barclays and Barclays Bank (BBPLC) for mistakenly issuing US$15 billion worth of structured notes and exchange-traded notes (ETNs) above the volume it had registered for sale under its BBPLC US Shelf and failing ‘to implement internal control to track such transactions in real time’. The two companies have agreed to pay a US$200m civil penalty - the SEC additionally ordered Barclays bank to pay ‘disgorgement and prejudgment interest’ of more than US$161m, which was ‘deemed satisfied by an offer of rescission Barclays bank made to investors in the unregistered offerings’. Barclays offered to buy back approximately US$14.8 billion structured notes and US$2.8 billion of exchangetraded notes (ETNs). The UK bank said on 15 September that investors had submitted ‘valid claims’ covering US$7 billion of the US$17.7 billion of securities subject to the rescission offer. The SEC’s order states that, following a settled action against a Barclays bank
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www.structuredretailproducts.com
According to the order, the bank’s personnel understood that the firm needed to track actual offers and sales of securities against the amount of registered offers and sales on a real-time basis; ‘yet, no internal control was established for this purpose’. As a result of this failure, Barclays bank offered and sold the unprecedented amount of unregistered securities. The regulator acknowledged Barclays’ efforts to identify, disclose and remediate this conduct, however, ‘the control deficiencies and the scope of the conduct at issue here was simply staggering’, according to Gurbir S. Grewal (pictured), director of the SEC’s division of enforcement. ‘This case highlights why it is essential for firms like Barclays to have robust internal controls over their offers and sales of
securities, he said. ‘The time for other firms employing similar shelf registrations to take notice and improve their internal compliance and control functions is now.’ The regulator’s order also encouraged ‘any firms that have lost WKSI status to ensure the stability of their internal controls and to self-report any over-issuances, should any be found’. The UK bank is now facing a number of US class actions as law firms seek damages on behalf of investors that purchased ‘Barclays American Depositary Receipts (ADRs) between 18 February 2021 through 25 March 2022. The class actions filed by these law firm claim that the disclosure on 28 March 2022 of the overissuance on structured notes, resulted in the fall of the Barclays stock by US$0.96, or 10.6%, to close at US$8.09 per ADR, which caused losses to investors. The UK bank has slipped from the top three to the seventh place in the US market league table by sales volume year on year, SRP data shows – Barclays’ structured products sales volume in the US retail market has fallen to US$3.4 billion from US$9.9 billion with the issuance dropping to 809 from 1,985 products.
Barclays bank offered and sold the unprecedented amount of unregistered securities
