Barclays agreed to pay $19.5m to settle a securities lawsuit filed by investors in Manhattan federal court over its mistake of selling $17,7 billion more debt that US regulators had approved.
The settlement, which has been filed in court since Tuesday, is subjected to approval by US District judge Katherine Polk Failla.
What was the Barclays Debt Sale Case?
The case stems a significant mistake by Barclays, which led to the overselling and exchange-traded structured notes. It also alleges that the bank’s controls were insufficient to prevent this mistake.
Investors filed the lawsuit, claiming they suffered financial losses after believing Barclays’ assurances about its procedures being in line with regulatory standards.
The plaintiffs argued the bank misrepresented the internal control mechanisms of Barclays, which led them to invest in Barclays American Depositary Receipts between February 2020 and February 2023 without realizing the risks of over-issuance of debt.
Barclays will admit in March 2022 that it sold $15,2 billion more debt between 2017 and 2022 than was allowed by US regulators.
The situation deteriorated further when, in July 20,22, the bank revised its oversold amount from $17.7 billion to $2.01 billion and set aside PS1.59billion ($2.01billion) to deal with the excess issuance.
The bank also repurchased oversold debts and restated their financial statements for 2021. Executives called the error “entirely preventable” and a “self-inflicted issue.”
‘Recklessly’ negligent
Barclays maintains that it has not committed any wrongdoing despite the settlement.
The bank’s settlement decision comes after a court ruling which allowed the case to proceed, rejecting the bank’s attempt to dismiss it.
US District Judge Failla concluded that shareholders had a plausible claim and suggested that Barclays executives including former CEO Jes Stealey could be viewed as “recklessly negligent” in handling the matter.
She also pointed out that the bank’s debt-tracking system did not exist and was a major failure in preventing overissuance.
The lawsuit, titled In re Barclays Plc Securities Litigation accused the bank of misleading its investors about internal controls and regulatory compliance resulting in financial losses.
Shareholders complained that Barclays’ assurances about its debt policies were generic and inadequate to protect their investment.
Barclays agreed to compensate investors for their losses as part of the settlement agreement.
The case serves to remind us of the importance of adhering to strict regulatory standards and having robust internal controls at large financial institutions.
Jes Staley, former CEO of Barclays, resigned from his post in November 2021 due to the fallout caused by the overissuance.
The settlement may have resolved the immediate legal issues for Barclays but the implications for the bank’s regulatory compliance and internal controls are still unknown.
This case highlights the ongoing concerns in financial sector about transparency, risk management and the responsibilities banks have to protect investor interests.
The $19.5 million settlement is the result of months of litigation. It will serve as a warning to other financial institutions about the importance of meeting regulatory obligations and maintaining effective oversight over financial transactions.
This post Barclays settles $17.7 Billion debt sale lawsuit for only $19.5 Million amid securities fraud claims could be modified as new developments unfold.
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