Barclays Capital Inc has agreed to pay a $700,000 fine as part of a settlement with the Financial Industry Regulatory Authority (FINRA).
Under FINRA’s rules regarding research analyst conflicts of interest, a firm must have policies and procedures in place that prohibit an analyst from trading a security in a manner inconsistent with the analyst’s published assessment of that security. In addition, a member must disclose in an equity research report whether an analyst has a financial interest in the securities of a company covered in the report.
From January 2016 to August 2019, Barclays failed to establish and maintain a system of supervision, including written supervisory procedures (WSPs), reasonably designed to comply with these rules.
In particular, Barclays failed to timely or reasonably monitor the accounts of its managed stock analysts for compliance with trading restrictions on research equity analysts or to determine whether they held securities in companies they covered. As a result, the firm failed to identify and failed to disclose in 99 equity research reports that analysts held securities of a covered company and failed to discover three instances in which an analyst’s external account manager traded in a manner inconsistent with the analyst’s most recently published recommendation in a company.
Accordingly, the firm violated FINRA Rules 2241(b)(2)(J), 224l(c)(4)(A), 31 lO(a), and (b)(l) in 2010 as well.
The firm’s WSPs also did not include a process for reviewing securities trades in outside managed accounts of equity research analysts reasonably designed to detect potential violations of securities laws, including potential market manipulation and insider trading. Accordingly, the firm violated FINRA Rule 3110(d) in 2010 as well.
From at least April 2021 to March 2022, the firm failed to collect data on certain clients of Barclays affiliates to determine whether it had to disclose specific conflicts of interest in its research reports. As a result, the firm failed to disclose in at least 803 reports covering 22 issuers that an affiliate had received non-investment banking-related compensation from the issuer within the previous 12 months.
Accordingly, the firm violated FINRA Rule 2241(c)(4)(D) in 2010 as well.
In addition to the $700,000 fine, the defendant agreed to a censure.