Barclays Capital Securities was slammed with a $1.77 million fine by the U.K.’s Financial Services Authority Wednesday, marking the second time the firm was fined by the agency this month.
The latest fine comes in light of Barclays’ failure to properly protect client funds held in sterling money market deposits during intraday trading from 2001 to 2009, the FSA said. Those actions go against FSA rules, which prohibits firms from mixing firm and client funds in order to protect clients’ money. Based in London, the FSA is a non-governmental body run by the financial services industry.
The FSA’s fine comes after the agency reached an early settlement with Barclays, resulting in a fine reduced by 30%.
The select Barclays fund, which were segregated at night and matured into a bank account, typically mixed with the firm’s funds for five to seven hours during each trading day.
The client funds could have been lost if the firm had become insolvent during that daily window of time that the funds were mixed, the FSA said. The highest amount at risk at one time would have been $1.19 billion. The average amount of funds not segregated ranged from $9.5 million in 2002 to $612.96 million in 2009.
Barclays’ segregation structure did not result in any client losses or profits for the firm. The segregation failure was an error by the firm and corrected when it was discovered.
The new fine comes after the FSA fined Barclays on Jan. 18 for failures tied to sales related to two of its funds. That $12.2 million fine was the highest possible punishment the FSA could impose for retail failings.
From July 2006 to November 2008, two of Barclays funds, Aviva’s Global Balanced Income Fund and Global Cautious Income Fund, had serious failings in the way they were sold. In total, those funds had $1.096 billion in investments from 12,331 people.
The sales failures from those funds include: not making sure the funds suited the customers investment objectives, not properly training sales staff regarding the funds’ risks, not providing documents that would correctly identify risks to customers and not having an infrastructure to monitor the sales process.
Jon Laycock, a Barclays spokesman said, "we have worked constructively and in full cooperation with the FSA throughout the investigation. The segregation error was corrected on discovery. No counterparties, clients, or financial reports were affected and Barclays Capital did not profit in any way."
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