Class action against Barclays: it sold billions of debt securities over limits and without controls
A US judge ruled on Friday that Barclays must face a proposed class action from shareholders accusing the British bank of securities fraud in connection with the sale of $17.7 billion more in debt than regulators allowed .
The motivation for the lawsuit dates back to the bank's behavior which came to light in 2022, when it was discovered that the institution had issued and sold an enormous quantity of " Structured notes ", i.e. debt securities linked to particular markets such as oil or stock market indices . The bank had dramatically exceeded federal limits on issuing these securities, among other things, taking home a loss of more than $500 million, as reported by the WSJ , and had also had to buy back some of the debt sold. It has always been a problem linked to derivatives.
U.S. District Judge Katherine Polk Failla in Manhattan said shareholders had adequately argued that Barclays' failure to disclose that it lacked internal controls that could have detected five years of bad debt sales was was a material omission of facts.
He also left it up to shareholders to try to show that Barclays and several officials, including former CEO Jes Staley, were “grossly reckless” in ensuring the bank complied with federal securities laws even as it “blindly” sold the debt.
Bank executives later characterized the overissuance as an “entirely avoidable” and “self-inflicted” problem that would not have required “rocket science” to avoid.
The legal action followed Barclays' revelation in March 2022 that it had sold $15.2 billion more of structured and exchange-traded securities in the previous five years than the $20.8 billion authorized by regulators. US regulations.
Four months later, the bank increased the excess amount to $17.7 billion. It offered to buy back the excess and set aside £1.59 billion, open a new tab ($2 billion) for the overissue.
In a 57-page decision, Failla said shareholders could sue Barclays over its representations, including that the bank was "committed to operating within a sound internal control system" and adopted policies and procedures compliant with regulatory standards.
The judge said such statements are often too general to support legal action, but Barclays' case had a "critical difference" in that its debt sales tracking system "not only didn't work, it didn't exist" . Heartfelt congratulations to the entire Board of Directors who have thus exposed themselves to a lawsuit and who, above all, have no precise idea of what is happening in the company.
Failla also ruled that shareholders cannot sue for securities fraud over statements Barclays made after the excessive issuance was discovered. The lawsuit affected shareholders who lost money in Barclays American Depositary Receipts from February 18, 2021 to February 14, 2023, as costs increased due to the error. This justified savers who, seeing themselves defrauded of possible returns, were justified in suing the bank.
Staley stepped down as CEO in November 2021.
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The article Class action against Barclays: it sold billions of debt securities beyond limits and without controls comes from Economic Scenarios .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/class-action-contro-barclays-ha-venduto-miliardi-di-crediti-oltre-i-limiti-e-senza-controlli/ on Sat, 24 Feb 2024 10:00:21 +0000.