$361 million: Barclays settles with SEC after $17.7 billion of unregistered securities trades

Rick Steves

“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.”

Barclays FX

The Securities and Exchange Commission has charged Barclays in connection with the unregistered offer and sale of an unprecedented amount of securities due to a failure to implement any internal control to track such transactions in real time.

The case follows a settled Commission action against a Barclays affiliate in May 2017, which removed the bank its status as a well-known seasoned issuer (WKSI).

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 upon the filing of a new registration statement.

Given this requirement, Barclays personnel were required to track actual offers and sales of securities against the amount of registered offers and sales on a real-time basis. However, no internal control was established for this purpose.

Barclays case highlights need for robust internal controls

Barclays agreed to pay a $200 million civil penalty and the SEC additionally ordered Barclays Bank Plc. to pay disgorgement and prejudgment interest of more than $161 million, which was deemed satisfied by an offer of rescission made to investors in the unregistered offerings.

According to the SEC’s order, as a result of this failure, Barclays offered and sold approximately $17.7 billion of securities in unregistered transactions.

The bank self-reported its over-issuances to regulators, provided meaningful cooperation during the SEC staff’s investigation, and subsequently commenced a rescission offer, the regulator added.

Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, said: “This case highlights why it is essential for firms like Barclays to have robust internal controls over their offers and sales of securities. 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. The time for other firms employing similar shelf registrations to take notice and improve their internal compliance and control functions is now.”

Sheldon L. Pollock, Associate Regional Director of the SEC’s New York Regional Office, commented: “All issuers should maintain robust internal controls to prevent offering and selling securities in unregistered transactions. We encourage 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.”

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