Barclays Agrees $361m SEC Fine for Securities Over-Issuances09.30.2022
The Securities and Exchange Commission charged Barclays PLC and Barclays Bank PLC (BBPLC) 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. Both firms restated their year-end 2021 audited financial statements filed with the Commission as a result of the over-issuances and internal control failure. The firms agreed to pay a $200 million civil penalty and the SEC additionally ordered BBPLC to pay disgorgement and prejudgment interest of more than $161 million, which was deemed satisfied by an offer of rescission BBPLC made to investors in the unregistered offerings.
The SEC’s order states that, following a settled Commission action against a BBPLC affiliate in May 2017, BBPLC lost its status as a well-known seasoned issuer (WKSI). As a result, BBPLC 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. The SEC’s order notes that, given this requirement, BBPLC 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. According to the SEC’s order, as a result of this failure, BBPLC offered and sold approximately $17.7 billion of securities in unregistered transactions. As the SEC’s order states, BBPLC self-reported its over-issuances to regulators, provided meaningful cooperation during the SEC staff’s investigation, and subsequently commenced a rescission offer.
“This case highlights why it is essential for firms like Barclays to have robust internal controls over their offers and sales of securities,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement. “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.”
“All issuers should maintain robust internal controls to prevent offering and selling securities in unregistered transactions,” said Sheldon L. Pollock, Associate Regional Director of the SEC’s New York Regional Office. “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.”
The SEC’s order finds that BBPLC violated provisions of the Securities Act of 1933 and that both firms violated provisions of the Securities Exchange Act of 1934. Without admitting or denying the SEC’s findings, both firms agreed to cease-and-desist from violating the charged provisions and to comply with certain undertakings designed to effect compliance with Section 5 of the Securities Act, in addition to paying the $200 million civil penalty. BBPLC also agreed to pay disgorgement of $149,731,011 and prejudgment interest of $11,463,229, deemed satisfied by its offer of rescission.
The SEC’s investigation was conducted by Lindsay S. Moilanen of the New York Regional Office and Joshua I. Brodsky of the Complex Financial Instruments Unit. It was supervised by Mr. Pollock and Osman Nawaz, Chief of the Complex Financial Instruments Unit. The Enforcement Division appreciates the assistance of their colleagues from the Corporation Finance Division.
The deal combines HSBC Canada's strength in international products with RBC's breadth of capabilities.
C.S. Venkatakrishnan said his prognosis is excellent and his condition is curable.
The agencies found a shortcoming related to data quality and data management.
Goldman Sachs Asset Management agreed to pay a $4m penalty.
Investment bank has been impacted by industry-wide slowdown in capital markets and reduced sales & trading.