Barclays Penalized £40 Million for Reckless Fundraising Practices

The UK’s FCA has fined Barclays £40 million for “reckless” conduct during a 2008 fundraising drive, citing failure to disclose arrangements with Qatari investors. Barclays has decided to withdraw its appeal against the findings, aiming to close this chapter after extensive scrutiny of its financial practices during the crisis. Mr. Smart from the FCA noted the seriousness of the misconduct but acknowledged Barclays’ organizational changes since then.

The UK’s Financial Conduct Authority (FCA) has imposed a £40 million fine on Barclays for its conduct during a fundraising effort in 2008, labeling the actions as “reckless” and lacking integrity. The FCA asserted that Barclays did not disclose key arrangements involving Qatari investors during a critical period marked by the financial crisis. Despite intending to contest the FCA’s findings in court, Barclays has chosen to withdraw its appeal, opting to “draw a line” under past issues to focus on the future.

In prior findings, the FCA discovered that Barclays had paid excessive fees amounting to hundreds of millions of pounds to select Qatari investors to secure new capital. The institution failed to communicate these dealings adequately to the market and its shareholders. This fundraising endeavor spared Barclays from having to seek a government bailout, contrasting with its rivals such as Royal Bank of Scotland and Lloyds.

The scrutiny surrounding Barclays’ fundraising, which involved raising billions from sovereign wealth funds in various nations, was intense amid the fallout from the collapse of Lehman Brothers. The FCA’s allegations highlighted undisclosed fees paid to Qatari entities, including a notable £322 million in fees over several years. Previous legal pursuits against Barclays executives were dropped, and according to the FCA, the original £50 million fine was adjusted, acknowledging the extensive time elapsed since the incidents occurred.

Steve Smart, the FCA’s joint executive director of enforcement and market oversight, noted the seriousness of Barclays’ misconduct but also recognized the significant changes the organization has undertaken since that period. He stated, “Barclays’ misconduct was serious and meant investors did not have all the information they should have had,” emphasizing the importance of transparency for listed companies. In response, a Barclays representative articulated the desire to move on from these issues, remarking, “in view of the time elapsed since the events, Barclays wishes to draw a line under the issues” referenced by the FCA.

The fine imposed on Barclays relates to financial activities during a tumultuous period in 2008 when the bank was seeking to raise capital amid a global financial crisis. The FCA found that Barclays engaged in undisclosed financial arrangements with Qatari investors while failing to inform shareholders adequately about these dealings. The bank aimed to avoid governmental intervention that was necessary for multiple peers during that time, including Royal Bank of Scotland and Lloyds, by securing large investments from international sovereign wealth funds. The seriousness of the allegations has prompted regulatory interest that continued for over a decade, culminating in the recent penalty.

The £40 million fine levied against Barclays by the FCA underscores the essential requirement for financial institutions to maintain transparency and integrity in their fundraising activities. This case reaffirms the regulator’s commitment to holding institutions accountable for oversight lapses that negatively impact investors. Although Barclays disputes the FCA’s findings, the decision to withdraw the appeal illustrates a desire to move forward and focus on strengthening internal practices and governance.

Original Source: www.bbc.com