Barclays Capital

Virginia Files $1.15B Securities Lawsuit Against Citigroup, Credit Suisse, JPMorgan Chase, and Other Big Banks

Published on: September 27, 2014 | by Shepherd Smith Edwards & Kantas, LLP

The state of Virginia is suing 13 of the biggest banks in the U.S. for $1.15 billion. The state’s Attorney General Mark R. Herring claims that they misled the Virginia Retirement System about the quality of bonds in residential mortgages. The retirement fund bought the mortgage bonds between 2004 and 2010.

The defendants include Citigroup (C), JPMorgan Chase (JPM), Credit Suisse AG (CS), Bank of America Corp. (BAC), Goldman Sachs Group Inc. (GS), Morgan Stanley (MS), Deutsche Bank (DB), RBS Securities (RBS), HSBC Holdings Inc. (HSBC), Barclays Group (BARC), Countrywide Securities, Merrill Lynch, Pierce, Fenner & Smith Inc., and WAMU Capital (WAMUQ). According to Herring, nearly 40% of the 785,000 mortgages backing the 220 securities that the retirement fund bought were misrepresented as at lower risk of default than they actually were. When the Virginia Retirement System ended up having to sell the securities, it lost $383 million.

The mortgage bond fraud claims are based on allegations from Integra REC, which is a financial modeling firm and the identified whistleblower in this fraud case. Herring’s office wants each bank to pay $5,000 or greater per violation. As a whistleblower, Integra could get 15-25% of any recovery for its whistleblower claims.

Barclays to Pay $15M SEC Settlement Over Compliance Failures Following Lehman Brothers Acquisition, Pays $61.7M Fine to U.K.’s FCA Over Client Asset Issues

Published on: September 24, 2014 | by Shepherd Smith Edwards & Kantas, LLP

Barclays Capital Inc. (BARC) has consented to pay $15 million to the U.S. Securities and Exchange Commission to resolve civil charges claiming that it did not make sure the financial institution was in proper compliance with securities laws and its own rules after acquiring Lehman Brothers’ advisory division. According to the regulator, the firm did not adopt and execute written procedures and policies or keep up the needed records and books to stop certain violations.

For example, says the SEC, Barclays executed over 1,500 principal transactions with advisory client accounts but did not seek the necessary written disclosures and get the requisite customer consent. It also made money and charged fees and commissions that were not consistent with disclosures for 2,785 advisory client accounts, underreported assets under management by $754 million when amending its Form ADV a few years ago, and violated the Advisers Act’s custody provisions.

The violations caused clients to lose about $472,000 and pay more than they should have, while Barclays made additional revenue that was greater than $3.1 million. Barclays has since paid back or credited $3.8 million plus interest to customers who were affected. It also consented to remedial action and will retain a compliance consultant to perform an internal review.

Securities Lawsuit Accuses Deutsche Bank, JPMorgan Chase, Credit Suisse, and Other Banks of Manipulating ISDAfix

Published on: September 4, 2014 | by Shepherd Smith Edwards & Kantas, LLP

The Alaska Electrical Pension Fund is suing several banks for allegedly conspiring to manipulate ISDAfix, which is the benchmark for establishing the rates for interest rate derivatives and other financial instruments in the $710 trillion derivatives market. The pension fund contends that the banks worked together to set the benchmark at artificial levels so that they could manipulate investor payments in the derivative. The Alaska fund says that this impacted financial instruments valued at trillions of dollars.

The defendants are:

• Bank of America Corp. (BAC)

Barclays and Deutsche Bank Under Scrutiny Over Barrier Options Transactions

Published on: July 17, 2014 | by Shepherd Smith Edwards & Kantas, LLP

The U.S. Senate Permanent Subcommittee on Investigations plans to conduct a hearing over what it believes are abusive transactions made by financial institutions. Bloomberg is reporting that Deutsche Bank AG (DBK), Barclays PLC (BARC), and hedge fund manager Renaissance Technologies LLC will have representatives testifying at the hearing.

The July 22 hearing is expected to focus on barrier options transactions between the banks and the hedge fund manager. There are tax benefits that allegedly came from the options, which the Internal Revenue Service and Renaissance are in dispute over.

Bloomberg reports that the transactions let the hedge fund manager’s Medallion fund borrow up to $17 for every dollar the fund owned, which is more than it could have in a traditional margin-lending relationship. Under Federal Reserve rules, stockbrokers are not allowed to lend over $1 for each client money dollar. Usually, hedge funds can borrow no more than $5 or $6 for each dollar it has and only if there is a special agreement with the banks.

US Supreme Court Will Hear Appeal Over Libor Antitrust Claims

Published on: July 2, 2014 | by Shepherd Smith Edwards & Kantas, LLP

The United States Supreme Court has agreed to hear an appeal in Ellen Gelboim et al v. Bank of America Corp. The lawsuit was filed by bond investors who lost money in securities tied to the London Interbank Offered Rate and the manipulation of the global benchmark interest rate. Now, the nation’s highest court is granting their request to let their claims go forward and will hold oral arguments on the lawsuit during its next term.

For the last three years, different kinds of investors have filed numerous securities fraud cases against the largest banks in the world claiming that they manipulated Libor. Last year, a district court judge allowed investors to pursue certain claims but threw out their antitrust claims.

Judge Naomi Reice Buchwald said that the settling of Libor was not competitive but, rather, cooperative; it involved banks providing data to a trade group that established the rate. Plaintiffs therefore could not prove that anticompetitive behavior harmed them.

NY Sues Barclays Over Alleged High Speed Trading Favors in Dark Pool

Published on: June 26, 2014 | by Shepherd Smith Edwards & Kantas, LLP

New York Attorney General Eric Schneiderman has filed a securities fraud lawsuit against Barclays (BARC) Plc. accusing the British bank of lying about giving preference to high-frequency traders. The state contends that Barclays took part in fraudulent activity related to a dark pool. The British-based bank has 20 days to respond to the securities fraud charges.

Financial Industry Regulatory Authority data says that for the first week of June 2014, LX was the number two biggest alternative trading system in the United States. According to the high frequency trading case, LX, which is Barclays’ dark pool, favors computer-driven firms that can weave their way through the market at super fast speeds yet downplays how much these high-frequency traders use the venue.

Schneiderman says that the bank falsely depicted the way it routes the orders of clients and claimed to protect them from high-speed firms, when really the dark pool was run to the advantage of these traders. He claims that Barclays even specifically sought to bring in high-speed traders to LX, giving them preferential treatment over others by providing them with details about the way the dark pool is run.

FINRA Headlines: SRO Fines Goldman Sachs, Merrill Lynch, and Barclays Capital $1M Each & Makes Dark Pool Data Available

Published on: June 7, 2014 | by Shepherd Smith Edwards & Kantas, LLP

FINRA Fines Merrill Lynch, Goldman, and Barclays Capital $1M Each Over Blue Sheet Data

The Financial Industry Regulatory Authority has issued a censure that fines Goldman Sachs & Co. (GS), Merrill Lynch, Pierce Fenner & Smith Inc., and Barclays Capital Inc. $1 million each. The firms are accused of not submitting accurate and complete data about trades conducted by them and their customers to the SRO and other regulators. This information is known as “blue sheet” data. Firms are legally required to give regulators this information upon request.

Blue sheets give regulators specific information about trades, including the name of a security, the price, the day it was traded, who was involved, and the size of transaction. This information is helpful to identify anomalies in trading and look into possible market manipulations.

Barclays Must Face Shareholder Lawsuit Over Libor Manipulation

Published on: April 25, 2014 | by Shepherd Smith Edwards & Kantas, LLP

The 2nd U.S. Circuit Court of Appeals in New York says that Barclays Plc (BARC) shareholders can go ahead with their securities lawsuit claiming that the British bank caused them to suffer financial losses over manipulation of Libor. The ruling reverses a lower court’s decision.

The London Interbank Offered Rate is used to set interest rates on mortgages, credit cards, and student loans. It is also the average interest rate that banks can use to estimate what they would be charged if they borrowed from other banks. Regulators in Europe and the US have been investigating whether banks manipulated Libor when the 2008 financial crisis was happening.

In 2012, Barclays consented to pay British and American regulators $453 million and admitted that between August 2007 and January 2009 it frequently made Libor submissions that were artificially depressed. (Other big financial institutions that have settled Libor manipulation allegations included UBS AG (UBS), ICAP Plc (IAB), Rabobank, and Royal Bank of Scotland Group (RBS)).

Barclays Settles Two Libor-Related Securities Cases

Published on: April 16, 2014 | by Shepherd Smith Edwards & Kantas, LLP

Barclays (BARC) has just settled two Libor-related securities cases alleging mis-selling related to Libor. In the first lawsuit, filed by Guardian Care Homes over interest swaps worth £70M that were linked to the benchmark interest rate, Barclays has agreed to restructure a loan for the home care operator.

The bank had tried to claim the case lacked merit and that it was the home care operator that owed money. Barclays argued that the swaps, purchased in 2007 and 2008, cost the bank millions of pounds when interest rates plunged in the wake of the economic crisis. In 2012, Barclays was fined $450 million for Libor rigging.

The London interbank offered rate is relied on for measuring how much banks are willing to lend each other money. Among the allegations against the firm was that it tried to manipulate and make false reports about benchmark interest rates to benefit its derivatives trading positions. Barclays settled with regulators in the US and the UK.

In the other Libor mis-selling case, the bank has arrived at a “formal” compromise in the securities case involving property firm Domingos Da Silva Teixeira over more rigging claims and Portuguese construction. The company had filed a 11.1 million euro securities case against the bank.

Also, this week, three ex-ICAP (IAP) brokers appeared in court in London to face charges accusing them of running a securities scam to manipulate the Libor benchmark interest rates. ICAP is the biggest interbroker dealer in the world.

The men allegedly engaged in conspiracy to defraud. Their scam allegedly involved Tom Hayes, an ex-yen derivatves trader. He is charged with multiple counts of conspiracy to commit fraud while he worked for UBS (UBS) in Japan.

To date, 10 banks and ICAP have been ordered to pay$6 billion in fines. The Libor rigging scandal spans multiple continents and led to numerous criminal charges. Traders are accused of fixing Libor for profit.

Barclays settles with Guardian Care Homes in Libor-linked court case, The Guardian, April 7, 2014

Three former ICAP brokers in UK court on Libor fixing charges, Reuters, April 15, 2014

Barclays settles second Libor case in week, Yahoo, April 11, 2014

More Blog Posts:
Deutsche Bank, Royal Bank of Scotland Settle & Others for More than $2.3B with European Union Over Interbank Offered Rates, Institutional Investor Securities Blog, December 24, 2013

Barclays LIBOR Manipulation Scam Places Citigroup, Credit Suisse, Deutsche Bank, JP Morgan Chase, and UBS Under The Investigation Microscope, Institutional Investor Securities Blog, July 16, 2012

Three Ex-Barclays Employees Charged by UK Prosecutors in Libor Rigging Scandal

Published on: February 18, 2014 | by Shepherd Smith Edwards & Kantas, LLP

Prosecutors in the United Kingdom are charging three ex-Barclays Plc (ADR) employees with conspiring to manipulate the London interbank offered rate. The Serious Fraud Office charged Jonathan James Mathew, Peter Charles Johnson, and Styilianos Contogoulas with conspiring to defraud. These are the first criminal charges involving the manipulation of the US dollar Libor.

Over a dozen firms are under investigation by regulators and prosecutors around the world over collusion in rigging the London interbank offered rate and related benchmarks. Mathew and Johnson were employed by Barclays, the first firm fined ($450 million) over Libor by UK and US authorities two years ago, between 2001 through September 2012. Contogoulas, who worked with Barclays from 2002 through 2006, was with Merrill Lynch (MER) after that through September 2012.

Previous to the allegations against Contogoulas, Johnson, and Mathew, criminal charges against persons in the UK and the US solely had involved an alleged rate-manipulating ring led by trader Tom Hayes, a former Citigroup Inc. (C) and UBS AG (UBS) employee. He pleaded not guilty to US charges. With this latest criminal case against the three men, 13 individuals now face criminal cases in the UK probe into Libor.