Barclays Agrees to $19.5 Million Settlement in Securities Fraud Lawsuit

Barclays (BARC.L) has agreed to pay $19.5 million to resolve a securities fraud lawsuit brought by shareholders who alleged the British banking giant sold $17.7 billion more debt than regulators permitted.

The preliminary settlement, part of a proposed class action, was filed on Tuesday in Manhattan federal court and requires approval by U.S. District Judge Katherine Polk Failla.

Shareholders claimed financial losses due to their reliance on Barclays’ assurances that the bank adhered to regulatory standards through its policies and procedures, and its stated commitment to robust internal controls.

The allegations trace back to March 2022, when Barclays admitted to having issued $15.2 billion more in structured and exchange-traded notes over the previous five years than the $20.8 billion limit authorized by U.S. regulators. The bank later revised the oversold amount to $17.7 billion in July 2022. At that time, Barclays offered to repurchase the excess securities and set aside 1.59 billion pounds ($2.01 billion) to address the issue.

In the wake of the disclosure, Barclays also restated its 2021 financial statements.

Executives described the overissuance as both “entirely avoidable” and a “self-inflicted” error.

Despite the settlement agreement, Barclays has continued to deny any wrongdoing, according to court documents filed on Tuesday.

The legal dispute drew renewed attention in February when Judge Failla declined to dismiss the lawsuit. She stated that shareholders could attempt to demonstrate that Barclays officials, including former CEO Jes Staley, acted with “actionable recklessness.” The judge further noted that while Barclays’ assurances about its compliance policies appeared generic, they could substantiate the shareholders’ claims, given that the bank’s debt-tracking system “did not just underperform – it did not exist.”

The lawsuit specifically applies to investors who held Barclays’ American depositary receipts between February 18, 2021, and February 14, 2023.

Staley, who resigned as Barclays’ CEO in November 2021, was a central figure in the controversy.

Meanwhile, shares of the London-listed lender, which have surged 72 percent year-to-date, traded 0.3 percent lower at 0815 GMT on Wednesday, in alignment with the FTSE 100 index (.FTSE).

The case is titled In re Barclays Plc Securities Litigation, U.S. District Court, Southern District of New York, No. 22-08172. 

By fLEXI tEAM