Recently, the U.S. Securities and Exchange Commission (SEC) announced an enforcement action against international investment bank Barclays Capital.
The SEC found that two of Barclay’s advisory programs charged some 2,000 clients fees for various tasks — including due diligence and monitoring of third-party investment managers — that they did not perform. The net result was that Barclays overbilled clients by some $50 million.
Barclays was also found to have collected excess mutual fund sales fees from 63 brokerage clients by recommending more expensive mutual fund share classes, the SEC said, when less expensive options were available. Additionally, the SEC found over 22,000 accounts where Barclays paid excess fees due to billing errors and miscalculations by the investment firm.
In its ruling, the SEC found Barclays in violation of sections of both the Investment Advisers Act of 1940 and the Securities Act of 1933. In a settlement, Barclays agreed to settle and pay over $97 million.
“Barclays failed to ensure that clients were receiving the services they were paying for,” said C. Dabney O’Riordan, co-chief of the SEC Enforcement Division’s Asset Management Unit. “Each set of clients who were harmed are being refunded through the settlement.”
The settlement included creating a Fair Fund worth over $49.78 million to refund advisory fees in addition to over $13.75 million in interest and payment of a $30 million penalty.
The investment bank will also pay $3.5 million to advisory clients who invested in unmonitored, underperforming investment strategies and third-party investment managers, as well as to the brokerage clients who were directed toward more expensive share classes.