Sept 30 (Reuters) - British lender Barclays
agreed a $361 million penalty with U.S. regulators on Thursday
for "staggering" failures that led it to oversell $17.7 billion
of structured products, racking up further costs for an error
that has blighted CEO C.S. Venkatakrishnan's first year in
The bank said after London market close on Friday that its
own review led by external lawyers into the error had also
concluded, adding it would consider individual accountabilities
and whether to take disciplinary action or dock pay packets
based on the findings.
Barclays' shares closed down 0.2% on the day.
The conduct concerned dates back to March this year when
Barclays disclosed that it had accidentally oversold complex
structured and exchange-traded notes, overshooting by about 75%
a $20.8 billion limit on such sales it had agreed with the
Securities and Exchange Commission.
The bank had failed to implement any internal controls to
track such transactions in real time, the SEC found.
"While we acknowledge Barclays' efforts to identify,
disclose and remediate this conduct, the control deficiencies
and the scope of the conduct at issue here was simply
staggering," Gurbir Grewal, director of the SEC's Division of
Enforcement, said in a statement.
Barclays will pay the penalty without admitting or denying
the SEC's findings, it said.
Barclays said its review found the over-issuance happened
primarily because of a failure to identify and escalate to
senior executives the consequences of a change in its issuer
status and because of a decentralised structure for securities
The error was not due to "a general lack of attention to
controls by Barclays", the bank said its review concluded.
Buyers of the notes, considered "unregistered securities,"
had the right to demand Barclays buy back the products 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, denting its profits.
On Thursday, the SEC said Barclays had agreed to pay a $200
million civil penalty for the control lapses. In addition, it
agreed to pay disgorgement and interest of more than $161
million, although the regulator said that additional charge was
satisfied by the buyback offer.
While the SEC settlement helps draw a line under the
incident, which has been an embarrassment for Venkatakrishnan -
known at the bank as 'Venkat' - it still faces private
litigation relating to the incident.
Barclays also still has to outline the final costs of its
so-called rescission offer to buy back the securities it sold in
error. The bank said on Friday the full financial impact would
be "materially in line" with that disclosed in its half-year
financial results, with further details in its third quarter
results on Oct 26.
Barclays said this month that investors had submitted claims
for $7 billion out of the $17.7 billion worth of securities it
Under a previous enforcement settlement Barclays agreed with
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 filing requirements.
As a result, Barclays had to quantify the total number of
securities that it anticipated offering and selling and pay
registration fees for those offerings in advance. In August
2019, the bank and the SEC agreed Barclays could offer or sell
approximately $20.8 billion of securities, for a period of three
Given this requirement, staff knew they had to keep close
track of actual offers and sales of securities against the
amount of registered offers and sales on a real-time basis, but
the bank failed to establish a mechanism to do this, the SEC
Around March 9, staff realized that they had oversold the
agreed amount of securities and alerted regulators a few days
later, the SEC said.
(Reporting by John McCrank in New York, Kanishka Singh in
Washington and Iain Withers in London; editing by Deepa
Babington, Jason Neely and Nick Zieminski)