Barclays Capital Failure to Supervise
According to an SEC press announcement this week, Barclays Capital will pay more than $16.5 million as part of a settlement due to allegations that the company did not properly supervise two of its former mortgage bond traders.
Two former Barclays Capital residential mortgage-backed bond traders in New York, “made false or misleading statements to Barclays RMBS customers, including false or misleading about the price at which Barclays had bought the securities; the amount of profit Barclays was making for facilitating the trades; and who owned the securities, including creating a fictional third-party to create the appearance of price negotiations,” according to the SEC.
The SEC alleges that the traders added excessive mark-ups on certain transactions without notifying their customers.
According to the press release, “In trading non-agency RMBS, Barclays purchased the securities for its own account and then sold them from its own account to its customers. Barclays did not charge a commission on the trades. In many instances, the purchase and sale took place within minutes or hours and involved little or no risk to Barclays. The false or misleading statements led customers to accept less, or pay more, for securities than they otherwise might have accepted or paid.”
Further, The SEC alleges that the company “failed reasonably to supervise” the bond traders by not implementing appropriate supervisory procedures that could have prevented and/or detected the false or misleading statements that were made to customers and whether they were overcharging customers.
Between June 2009 and December 2012, the company gained close to $15.5 million in profits due to these actions, according to the SEC.
The company will repay the full $15.5 million to the customers and will also pay a penalty of $1 million.
The foregoing information is publicly available and is provided by The White Law Group.
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