Barclays Capital Inc., a unit of Barclays PLC (BCS), was slapped with a penalty of $15 million by the Securities and Exchange Commission (SEC). The fine comes as a result of the bank’s failure to comply with regulations regarding acquisition of advisory business of the currently defunct Lehman Brothers. Per the agreement, the British bank will not only pay the stipulated amount to settle charges leveled by the SEC, but it will also initiate measures to beef up its compliance system.
Barclays Capital acquired the advisory business of Lehman Brothers at a fire-sale price in 2008, at a time when the bank was on the brink of bankruptcy due to its over-exposure in the sub-prime real estate market. Notably, when a firm acquires the advisory business of some other entity, the acquiring firm must devote increased attention to its compliance system. However, this did not happen in the case of Barclays.
SEC examination reveals that the London-based bank, while integrating the acquired unit, failed to enhance its compliance system. The deficiency in the compliance system led to the violation of securities laws that culminated into penalty charges against Barclays.
SEC maintains high stringency against any type of compliance shortcomings. As per the SEC rulings, all investment advisers should hold well-designed and written compliance policies and procedures, so as to avert transgressions of the Investment Advisers Act and its rules.
It is indeed a good thing that Barclays is not getting escaped from the case by paying the penalty only, but it has also agreed to take measures to bolster its compliance system so that no such similar development crop up in the future.
Barclays currently carries a Zacks Rank #3 (Hold). Some better-ranked foreign banks include Banco do Brasil S.A. (BDORY), Grupo Financiero Inbursa, S.A.B. de C.V. (GPFOY) and Banco Santander (Brasil) S.A. (BSBR). While Banco do Brasil and Grupo Financiero Inbursa sport a Zacks Rank #1 (Strong Buy), Banco Santander holds a Zacks Rank #2 (Buy).
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