In the Matter of Barclays Capital Inc.
Admin. Proc. File No. 3-17978
On May 10, 2017, the Commission instituted and simultaneously settled administrative and cease-and-desist proceedings (“Order”) against Barclays Capital Inc. (“Barclays Capital”). In the Order, the Commission found that, from September 2010 through December 2015, Barclays Capital improperly overcharged certain advisory clients for advisory fees. First, from September 2010 through December 2014, Barclays Capital falsely represented to advisory clients that it was performing ongoing due diligence and monitoring of certain third-party managers who managed advisory clients’ assets using certain investment strategies, when Barclays was not performing such due diligence. As a result, Barclays improperly charged 2,050 client accounts fees for these promised services. Second, from January 2011 through March 2015, Barclays Capital charged 22,138 client accounts additional excess fees of approximately $2 million. Finally, from at least January 2010 through December 2015, Barclays recommended and sold certain clients more expensive mutual fund share classes when less expensive share classes were available, without disclosing that Barclays Capital had a material conflict of interest, i.e., that it would receive greater compensation from its clients’ purchases of the more expensive share classes.
As part of Barclays Capital’s settlement, it undertook to make a payment of approximately $3,504,285.00 (the “Remediation”), which represents (i) underperformance incurred by advisory clients who invested in certain Select and Quant Select strategies that underperformed market benchmarks; and (ii) up-front sales charges in Class A shares that were available to certain Eligible Customers on a load-waived basis and excess Rule 12b-1 fees and CDSCs charged on Cass C shares when certain Eligible Customers could have purchased load-waived Class A shares or no-load Class R shares. Barclays Capital will also pay reasonable interest on the Remediation. Barclays Capital is responsible for administering the payment of the Remediation to the affected advisory clients and brokerage customers in accordance with the Order. Barclays Capital will submit to the Commission staff a final accounting and certification of the disposition of the Remediation funds within 150 days of the distribution.
In addition to the Remediation, the Order required Barclays Capital to pay $93,537,659.00 in disgorgement, prejudgment interest, a civil monetary penalty. The Order created a Fair Fund, pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002, as amended, so the penalty, along with the disgorgement and prejudgment interest, can be distributed to those harmed by Barclays Capital conduct described in the Order (the “Fair Fund”). Barclays Capital is responsible for distributing the Fair Fund in accordance with the Order. Tax compliance and any related administrative expenses are the responsibility of the Barclays Capital. The Order requires that Barclays Capital submits to the Commission staff a final accounting and certification of the disposition of the Fair Fund within 150 days the distribution. See the Commission’s Order: Release No. 33-10355.
For more information, please contact the Commission:
Office of Distributions