Barclays Fined $15m for Lehman Acquisition Compliance Failings

Barclays was slapped with its second fine in under a day after the Securities and Exchange Commission gave the British lender a penalty for compliance failings relating to the acquisition of part of the now-defunct Lehman Brothers.

Barclays will pay $15m (£9.2m, €11.7m) to settle SEC's charges and undertake remedial measures to improve its system, which includes hiring an independent compliance consultant.

"When a firm acquires an advisory business, it must devote the attention and resources necessary to build a robust compliance system," said Julie M. Riewe, co-chief of the SEC enforcement division's asset management unit.

"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."

Only several hours earlier, the Financial Conduct Authority hit Barclays with a £37.7m fine for "failing to properly protect" £16.5bn worth of customers' assets.

The regulator added that, as a result of its "significant weaknesses" in the systems and controls in Barclays' Investment Banking Division between November 2007 and January 2012, clients risked incurring extra costs, lengthy delays or losing their assets if Barclays had become insolvent.

What Went Wrong?

According to the SEC's order instituting a settled administrative proceeding:

- Barclays failed to adopt and implement written policies and procedures and maintain certain required books and records to prevent the other violations.

- For instance, Barclays executed more than 1,500 principal transactions with its advisory client accounts without making the required written disclosures or obtaining client consent.

- Barclays also earned revenues and charged commissions and fees that were inconsistent with its disclosures for 2,785 advisory client accounts.

- Barclays also violated custody provisions of the Advisers Act, and underreported its assets under management by $754m when it amended its Form ADV on March 31, 2011.

- The violations resulted in overcharges and client losses of approximately $472,000 and additional revenue to Barclays of more than $3.1m. Barclays has since reimbursed or credited its affected clients approximately $3.8m including interest.

Source: SEC