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SEC Fines Barclays Over $12.7 Million For RMBS Supervisory Failures

A preliminary question that many potential SEC whistleblowers ask is whether the SEC has jurisdiction to investigate the type of fraud or misconduct that they have uncovered.  A potential whistleblower will often raise this question in his or her first conversation with an SEC whistleblower lawyer.

Among the types of cases that the SEC investigates are compliance and supervisory failures at public companies and financial advisory firms.  A recent case from earlier this week provides a good example.

Undisclosed, Excessive RMBS Mark-Ups

According to the SEC, two former Barclays traders charged undisclosed, excessive mark-ups to customers, and made false and misleading statements to them, while trading residential mortgage-back securities (“RMBS”).

SEC admin summary barclays

As set forth in the SEC’s Administrative Summary of the case, the false or misleading statements or omissions made by the two traders pertained to:

  • The bid and offer prices for the securities;
  • The owners of the securities;
  • Undisclosed, excessive mark-ups charged to customers;
  • Barclays’ profits for facilitating the trades; and
  • While not a traditional “false or misleading statement”, the traders created “a fictional third-party” to create the false appearance of legitimate price negotiations.

The SEC brought charges against the two traders for the underlying securities law violations.

Barclays’ Supervisory Failures

It does not appear that the SEC fined Barclays for the underlying securities law violations.  Instead, the SEC’s Order focuses on Barclays’ supervisory and compliance failures.

SEC order barclays

The SEC’s Order imposing sanctions states that Barclays had policies prohibiting excessive mark-ups, misrepresenting transaction terms and conditions, giving false or misleading impressions about the price or value of securities, and misrepresenting to customers Barclays’ profits on transactions.  Barclays also had procedures for reviewing electronic communications with third parties.

Barclays’ alleged supervisory and compliance failures included:

  • Failing to implement procedures for reviewing customer communications to identify and prevent false or misleading statements; and
  • Failing to perform meaningful reviews of customer transactions that had been flagged by Barclays’ electronic monitoring system for potentially excessive mark-ups.

The Order acknowledges that Barclays provided “significant cooperation” with the SEC’s investigation.   It also acknowledges that Barclays undertook remedial actions, including implementing new procedures and replacing a “defective compliance system”.

Over $12.7 Million In Disgorgement, Penalties, and Interest

Without admitting or denying the SEC’s allegations, Barclays agreed to settle the SEC action.  Among other things, Barclays agreed to pay slightly more than $12.7 million in disgorgement, prejudgment interest, and penalties.

In addition, Barclays agreed to pay over $15.5 million of its profits on the subject transactions to its affected customers.  According to the Order, if Barclays fulfills its obligation repay its customers, the SEC will deem that to satisfy the $12.7 million in disgorgement and prejudgment interest ordered against it.

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About the Pickholz Law Offices LLC

The Pickholz Law Offices LLC is a law firm that focuses on representing clients involved with investigations conducted by the U.S. Securities and Exchange Commission, FINRA, and other securities regulators.

The Pickholz Law Offices has represented employees, officers, and others in SEC whistleblower cases involving financial institutions and public companies listed in the Fortune Top 10, Top 20, Top 50, Top 100, Top 500, and the Forbes Global 2000. We were the first law firm ever to win an SEC whistleblower award for a client on appeal to the full Commission in Washington. Inside Counsel magazine named this achievement one of the five key events of the SEC whistleblower program. Examples of the Firm’s SEC whistleblower cases are available here.

In addition to representing SEC whistleblowers, since 1995 the Firm’s founder, Jason R. Pickholz, has also represented many clients in securities enforcement investigations conducted by the SEC, FINRA, the U.S. Department of Justice and US Attorney’s Offices, State authorities, and more. Examples of some of the many securities enforcement cases that Mr. Pickholz has been involved with are available here.

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If you would like to speak with a securities lawyer or SEC whistleblower attorney, please feel free to call Jason R. Pickholz at 347-746-1222.

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The Pickholz Law Offices represents U.S. and international clients in securities and white collar cases. The Firm has helped whistleblowers report frauds to the SEC, CFTC, and IRS, and has defended clients in investigations by the SEC, CFTC, DOJ, FINRA, and other financial and securities enforcement regulators.

The Firm’s founder, Jason Pickholz, is the author of the two-volume book Securities Crimes, has appeared on tv and radio, and has taught continuing legal education courses. A former BigLaw partner, he has been representing clients in financial and securities fraud cases since 1995. In recognition of his many achievements, Mr. Pickholz was elected by his legal peers to be a Fellow of The New York Bar Foundation, an honor limited to just 1% of all attorneys in the New York State Bar Association.

Mr. Pickholz has been counsel in many high-profile cases. He was the first attorney ever to win an SEC whistleblower award on appeal to the Commission, which Inside Counsel magazine called one of the five key events in the history of the SEC whistleblower program. On the defense side, Mr. Pickholz has defended clients in the SEC’s COVID-19 investigations, the CFTC’s cryptocurrency cases, and a former US Senator, among others.

If you want to speak with a CFTC, IRS, or SEC whistleblower lawyer, or with a white collar defense lawyer, you can call the Firm at 347-746-1222.

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