Barclays agreed to a $15 million settlement with the SEC for not strengthening its compliance system enough after the purchase of Lehman Brothers' wealth advisory business.
Among Barclays compliance failures, the regulator charged, were unauthorized and improperly disclosed transactions with client accounts, mismatching commissions and fees disclosures, and underreporting assets under management.
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 Divisions Asset Management Unit, in a statement. Barclays failed to establish this critical compliance foundation when it acquired Lehmans advisory business, and as a result subjected its clients to a host of improper practices and inadequate disclosures.
The SEC scrutinized the London-headquartered financial institution after the acquisition, and noted its investigation found that Barclays failed to adopt and implement written policies and procedures and maintain certain required books and records to prevent the other violations.
The regulator noted that Barclays completed more than 1,500 principal transactions for clients without disclosure or obtaining client consent, as well as earning revenues and charging commissions and fees that did not match disclosures for 2,785 advisory client accounts.
Additionally, the SEC stated, Barclays did not fully report its assets under management, short by $754 million in 2011 filings. According to the SEC, clients were overcharged $472,000, and the bank has since reimbursed affected clients $3.8 million, including interest.
Barclays did not have an immediate response to a request for comment. The bank told Bloomberg that it had cooperated with the SEC throughout its examination, and had since strengthened its supervisory and control environment.
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