SEC beefs up surveillance as Barclays probe results in $72 million fine
The Securities and Exchange Commission has stepped up its drive to monitor and enforce the financial markets by implementing new surveillance tools to examine and inspect reconciliations. The deal comes as the US regulator charges Barclays with failing to build adequate compliance systems and the bank suffers a fine in the UK.
The SEC is tasked with ensuring that financial markets are safe and that they operate fairly. It has chosen SmartStream’s TLM Reconciliations Premium and TLM SmartRecs, using data from ByAllAccounts, a data aggregation specialist owned by Morningstar.
The new tools will be used by the Office of Compliance Inspections and examinations, which oversees broker-dealers, transfer agents, clearing agencies, investment companies and advisers.
Earlier this week, the SEC charged Barclays with failure to build sufficiently robust compliance systems, a failure which the regulator says caused overcharging and client losses of nearly half a million dollars after the firm’s acquisition of a former Lehman Brothers advisory business in 2008. Barclays is alleged to have failed to maintain its records and under-reporting its assets by three quarters of a billion dollars in 2011.
The bank has agreed to pay a $15 million fine to settle the case, but the regulator will also conduct an internal review to ensure that its behaviour will improve. The incident follows on from a separate $61.9 million fine inflicted the same day by the UK’s Financial Conduct Authority for failure to safeguard client assets.
Barclays says the SEC charges are mainly historical. “The enforcement action announced today relates primarily to activity in our Wealth and Investment Management business in the Americas during the 2009-2011 time frame,” said the bank in its official statement. “Barclays has fully cooperated with the SEC throughout this examination. We have since strengthened our supervisory and control environment and remain committed to providing the best solutions and results for our clients world-wide.”Barclays was also fined £38 million by the UK Financial Conduct Authority this week for failing to properly protect clients’ custody assets worth £16.5 billion. The FCA said that “as a result clients risked incurring extra costs, lengthy delays or losing their assets if Barclays had become insolvent”.
It is the highest fine yet imposed by UK regulators for client assets breaches, reflecting ‘significant weaknesses’ in the systems and controls in Barclays’ Investment Banking Division between November 2007 and January 2012 and the number of affected accounts.