Barclays fined for major regulatory failing
Barclays Bank has been hit with the largest fine yet issued by the Financial Conduct Authority (FCA) for the mishandling of client assets.
The bank’s investment arm has been forced to pay almost £38 million after failing to comply with rules on the protection of client wealth that were introduced after the collapse of Lehmann Brothers.
It was punished for allowing 95 accounts to be set up across 21 countries in ways that contravened the rules, including a failure to name them in a way that clarified the ownership of the assets. This meant that in the event of insolvency the clients could have ended up losing some or all of the collective £16.5 billion that had been invested.
In addition to this, the FCA found the correct legal arrangements had not been put in place and there were insufficient records made to establish which company within the investment banking division was responsible for each account.
As such, the bank breached principles three and ten of the FCA’s asset management code.
Commenting on the punishment, FCA director of enforcement and financial crime Tracey McDermott remarked: “Barclays failed to apply the lessons from our previous enforcement actions, numerous industry-wide warnings, and exposed its clients to unnecessary risk.
“All firms should be clear after Lehman that there is no excuse for failing to safeguard client assets.”
The fine may have been higher, had Barclays not agreed to settle early, ensuring a 30 per cent discount. Had it not done so the penalty would have been close to £54 million.
It is not the first time the FCA or its predecessor the Financial Services Authority (FSA) has handed out a big fine for breaking the rules on investments.
Barclay’s subsidiary Barclays Capital Securities was fined £1.1 million in 2011, while 14 other cases have occurred, with organisations like Aberdeen Asset Management and Aberdeen Fund Management, Blackrock Investment Management, Christchurch Investment Management and JP Morgan all among the other financial sector firms hit in the pocket for breaching the rules.