Barclays Capital Inc. has agreed to pay $15 million to settle charges that it failed to ensure proper compliance with its own rules and securities laws following its acquisition of Lehman Brothers' advisory division in 2008.
The firm, which had previously operated primarily as a broker-dealer, failed to oversee the growth of its advisory unit following the merger, the SEC said in a release announcing the charges. The Lehman purchase resulted in the creation of
Barclays Wealth and Investment Management Americas, which currently has around 260 financial advisers and around $13 billion in assets under management as of March 2014, according to a filing.
“Despite the rapid growth of the advisory business following the Lehman acquisition,
Barclays Wealth and Investment Management failed to build a compliance infrastructure that was reasonably designed to prevent violations of the Advisers Act and its rules,” the SEC said.
A spokeswoman for
Barclays could not immediately be reached for comment. The firm agreed to pay the penalty, but neither admitted nor denied the findings.
In more than 1,500 transactions,
Barclays did not make required written disclosures or obtain client consent. In almost 3,000 other accounts,
Barclays also charged fees and commissions “inconsistent with its disclosures,” the SEC said.
The firm also underreported assets under management to regulators by $754 million in March 2011, the SEC said. The SEC's findings were discovered by its examiners during two examinations from July 2011 to March 2012.
A
Barclays spokeswoman, Kerrie Cohen, wrote in an e-mailed statement that most of the allegations related to activity at the firm from 2009 to 2011.The firm has cooperated with the SEC throughout its examination and has strengthened its “supervisory and control environment,” according to the
statement.
The violations resulted in overcharges and client losses of approximately $472,000 and additional revenue to
Barclays of more than $3.1 million.
Barclays has since reimbursed or credited its affected clients approximately $3.8 million including interest and also agreed to undertake remedial measures and hire an independent compliance consultant to conduct an internal review, according to an SEC release.
Barclays is also required to send a letter within 30 days to all clients to notify them of the entry of this order.
“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.”
