The Securities and Exchange Commission has charged Barclays PLC and Barclays Bank PLC (BBPLC) with failing to control and track an unprecedented amount of unregistered offers and sales of securities in real time. As a result of the over-issuances and internal control failure, both firms have restated their year-end 2021 audited financial statements filed with the Commission.
Following a settled Commission action against a BBPLC affiliate in May 2017, the SEC’s order states that that BBPLC has lost its status as a well-known seasoned issuer (WKSI). As an outcome, BBPLC had to quantify the total number of securities that it was anticipated to offer and sell, and pay registration fees for those offerings upon the filing of a new registration statement. Still, given this requirement, the SEC’s order notes that the BBPLC personnel understood the need to track actual offers and sales of securities against the amount of registered offers and sales on a real-time basis; yet, no internal controls were established for this reason.
Self-reported
As a result of the lack of registrations, the SEC’s order states that BBPLC offered and sold approximately $17.7bn of securities in unregistered transactions. However, BBPLC did self-reported its over-issuances to regulators, and has provided meaningful cooperation during the SEC staff’s investigation, and subsequently commenced a rescission offer.
“This case highlights why it is essential for firms like Barclays to have robust internal controls over their offers and sales of securities,” said Gurbir S Grewal, Director of the SEC’s Division of Enforcement. “While we acknowledge Barclays’ efforts to identify, disclose and remediate this conduct, the control deficiencies and the scope of the conduct at issue here was simply staggering. The time for other firms employing similar shelf registrations to take notice and improve their internal compliance and control functions is now.”
The SEC’s order finds that BBPLC has violated provisions of the Securities Act of 1933 and that both firms have violated provisions of the Securities Exchange Act of 1934.
“All issuers should maintain robust internal controls to prevent offering and selling securities in unregistered transactions,” said Sheldon L Pollock, Associate Regional Director of the SEC’s New York Regional Office. “We encourage any firms that have lost WKSI status to ensure the stability of their internal controls and to self-report any over-issuances, should any be found.”
“This case highlights why it is essential for firms like Barclays to have robust internal controls over their offers and sales of securities.”
Gurbir S Grewal, Director, SEC Division of Enforcement
Without admitting or denying the SEC’s findings, both Barclays PLC and Barclays Bank PLC have agreed to pay a $200m civil penalty, and the SEC has additionally ordered BBPLC to pay more than $161m in disgorgement and prejudgment, which was deemed satisfied by an offer of rescission BBPLC made to investors in the unregistered offerings.
On top of paying the penalties, the two firms have agreed to cease-and-desist from violating the charged provisions and to act in accordance with certain undertakings outlined to effect compliance with Section 5 of the Securities Act.