Barclays Capital Inc.
History Of Barclays Capital Inc.
Barclays Capital Inc became a FINRA member on October 1987. The firm is headquartered in New York, New York, and has 14 branches with 2,785 registered individuals. The firm’s business lines include commission-based brokerage, investment banking, and research services. The firm is a broker-dealer of U.S. government securities, corporate debt, mortgage, and asset-backed securities.
On November 15, 2016, FINRA accepted an AWC containing a censure and a $40,000 fine for Barclay’s failure to timely and accurately report fixed income transactions to FINRA’s Trade Reporting and Compliance Engine (TRACE) from April 1, 2015, through September 30, 2015.
Barclays Capital Inc. Report
Barclays Capital Inc reported transactions late to TRACE
FINRA Rule 6730(a) provides that each member that is a party to a transaction in a TRACE-Eligible Security must report the transaction as soon as practicable, but no later than within 15 minutes of the time of execution.
FINRA Rule 2010 provides that a member, in the conduct of its business, shall observe high standards of commercial honor and just and equitable principles of trade.
From January 2017 through October 2018, Barclays Capital Inc consistently reported over 2% of its Corporate transactions to TRACE more than 15 minutes after the time of execution, resulting in approximately 1,000 late reports a month. FINRA reviewed a sample of 800 potential late Corporate transactions and confirmed that the firm reported 772 of those transactions late.
The majority of the late Corporate transactions were caused by manual trade amendments or the trader or salesperson entering the trade late. After being contacted by FINRA, the firm addressed these issues through technological and supervisory enhancements that were completed by the first quarter of 2019.
From January 2017 through February 2019, Barclays Capital Inc often reported more than 3% of its Agency transactions to TRACE more than 15 minutes after the time of execution, resulting in approximately 26 late reports a month. FINRA reviewed a sample of 400 potential late Agency transactions and confirmed the firm reported 399 of those transactions late.
The Agency reporting issues were primarily caused by mapping (the coding that allows certain fields to be automatically populated) and technological issues. The firm addressed these issues in February and March 2019 after being contacted by FINRA.
Therefore, the Respondent violated FINRA Rules 6730(a) and 2010. Barclays Capital Inc over-reported Treasury transactions to TRACE FINRA Rule 6730(aX5) provides that members have an obligation to report transaction information promptly, accurately, and completely to TRACE.
In July 2017, Treasuries became TRACE-eligible after the Treasury Department and the Securities and Exchange Commission requested that FINRA collect data regarding U.S. Treasury cash market transactions. From July 10, 2017, through April 30, 2019, Barclays Capital Inc reported to TRACE an estimated 550,000 transactions or 18.78% of its Treasury transactions that it was not required to report. The over-reporting occurred in connection
with Treasury transactions executed between Barclays Capital Inc and its affiliate. Barclays often offset transactions with customers or other dealers with a transaction with the affiliate.
If Barclays was short, it would purchase an offsetting amount from the affiliate, or if it was long, it would sell that position to the affiliate. Due to a coding error, the firm erroneously reported both legs of the transaction to TRACE as if the firm were simultaneously buying and selling the same security at the same price. This coding error started when Treasury transactions became eligible for TRACE reporting in July 2017, and Barclays fixed the issue by September 4, 2019, after being contacted by FINRA. During this time, Barclays’ over-reporting generated false alerts in FINRA ‘s regulatory surveillance patterns.
Therefore, the Respondent violated FINRA Rules 6730(aX5) and 2010. Barclays Capital Inc captured the incorrect execution time of transactions to TRACE FINRA Rule 6730(c)(8) provides that a TRACE trade report contains the time of execution.
Exchange Act Rule I7a-3 requires broker-dealers to make and keep certain records including a memorandum of each brokerage order that should contain, to the extent feasible the time of execution or cancellation. Implicit in Exchange Act Rule 17a-3 is that these records contain accurate information
From January I, 2017 through September 30, 2017, Barclays Capital Inc reported the incorrect execution time for 293 sampled Corporate transactions to TRACE.
In addition, for 286 of these transactions, the firm did not record the correct execution time on the memorandum. Barclays Capital Inc did not timely enter the transactions into the order management system, which incorrectly reported the transactions’ execution time as the time the transaction was entered into the order management system.
Therefore, Respondent violated FINRA Rules 6730(cX8) and 2010 in 293 instances and Exchange Act Rule 17a-3 and FINRA Rule 2010 in 286 instances.
Barclays supervisory system, including its written supervisory procedures (WSPs), was not reasonably designed to achieve compliance with TRACE reporting rules FINRA Rule 3110(a) provides that each member shall establish and maintain a system to supervise the activities of each associated person that is reasonably designed to achieve compliance with applicable securities laws and regulations, and with FINRA rules.
FINRA Rule 3110(b) provides that each member shall establish, maintain and enforce WSPs to supervise the type of business in which it engages and the activities of its associated persons that are reasonably designed to achieve compliance with applicable securities laws and regulations, and with applicable FINRA rules.
Barclays had a decentralized supervisory system that was not reasonably designed to identify TRACE reporting issues From January 2017 through April 2019, Barclays primarily supervised TRACE reporting by requiring up to 67 supervisors to review weekly and monthly reports of TRACE reporting, which included individual transactions that were reported late and statistics of late reporting.
The firm’s WSPs required supervisors to review reporting activity to determine if there were any issues that needed to be escalated. When a supervisor did escalate issues, it was sent to an operations team and there was no individual or individuals with supervisory authority tasked with reviewing for larger patterns of TRACE reporting issues that affected multiple traders or salespeople as in the case here.
Therefore, the firm did not identify the ongoing TRACE reporting issues discussed here. Barclays had no supervisory system to identify the over-reporting of transactions with its affiliates
From January 2017 through April 2019, Barclays had no supervisory system, including WSPs, in place that enabled it to identify its over-reporting of Treasury transactions. Barclay’s procedures for the identification of over-reporting of transactions only applied to interdealer transactions, not transactions with the firm’s affiliate. Because the affiliate was not a broker-dealer, these transactions were not included in supervisory reviews.
Penalties, Punishments & Sanctions
a censure;
a $650,000 fine;
and an undertaking to revise the firm’s written supervisory procedures with respect to over-reporting of Treasury transactions eligible for TRACE reporting.
Barclays Capital Inc. Review
From January 2017 through April 2019, Barclays had systemic TRACE reporting issues that caused numerous violations of FINRA Rules 6730 and 2010. Barclays: (i) failed to timely report transactions in TRACE-eligible Corporate Bonds and TRACE-eligible Agency Debt Securities, (ii) over-reported Treasury transactions to TRACE, and (iii) reported the incorrect time of execution for Corporate transactions to TRACE.
In addition, the firm violated Exchange Act Rule 17a-3 and FINRA Rule 2010 by failing to show the correct time of execution on the memoranda of hundreds of brokerage orders. The firm also failed to establish a supervisory system reasonably designed to achieve compliance with TRACE reporting rules in violation of FINRA Rules 3110 and 2010.
How To Spot A Fraud Finance Advisor (Infographic)
Help For Victims Of Barclays Capital Inc.
If you have lost funds because of misrepresentation, unsuitable investment, or unsuitable investment strategy from Barclays Capital Inc. Then you can take legal action and get justice. Fraud, Malpractice & dereliction of duty should not be taken lightly, especially in this industry. We highly suggest that you notify authorities or seek legal action if your financial advisor or brokerage firm fails to abide by FINRA’s rules are regulations.
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They need to make sure that the financial advisor is not being manipulative or having an unreasonable bias towards certain investments. If the financial advisor and/or the brokerage firm breaches these duties, then the client/customer may be entitled to a full or partial recovery of their losses.
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