Barclays to Pay $97 Million for Overcharging Clients: SEC
Barclays Capital has agreed to pay $97 million to settle allegations that its Wealth and Investment Management Americas unit overcharged clients by as much as $50 million over five years, according to a issued Wednesday by the Securities and Exchange Commission.
Barclays, which sold the Wealth Americas unit to Stifel Financial in December 2015, overcharged more than 24,200 clients in advisory and brokerage accounts from September 2010 until December 2015, the SEC said. The firm failed to conduct promised due diligence on investment strategies in two wrap account programs and improperly placed clients into more expensive funds, according to the order.
The $97 million penalty includes a $30 million fine, $63.8 million in disgorgement and interest, and a $3.5 million refund to certain advisory clients whose accounts underperformed.
A spokesman for Barclays, which settled the charges without admitting or denying the allegations, declined to comment.
From September 2010 to December 2014, over 2,000 clients paid a total of $48 million in advisory fees for two ‘wrap’ account programs, the Select Advisors Program and the Accommodation Manager program. Barclays said the fees, which varied between 0.32% and 1.75% of assets, would help cover due diligence and monitoring of investment strategies offered by sub-managers. However, due to lack of resources, Barclays did not actually perform the promised monitoring, the SEC said.
Some of the unmonitored strategies in the wrap programs underperformed their benchmarks by $3.4 million, according to the order.
“Barclays failed to ensure that clients were receiving the services they were paying for,” C. Dabney O’Riordan, co-chief of the SEC’s enforcement unit’s asset management division said in a statement. “Each set of clients who were harmed are being refunded through the settlement.”
Additionally, from January 2011 to March 2015, Barclays charged 22,138 clients $2 million in excess fees as a result of its using old or inaccurate pricing information when calculating the value of client assets in advisory accounts for quarterly billing.
Another 63 brokerage customers paid an excess of $110,000 in accounts because they were sold share classes more expensive than the Class R shares for which they were eligible. In other instances, the firm sold clients Class A shares without waiving the upfront sales charge for clients who qualified for the waiver.
Barclays had around 180 financial advisors managing $56 billion client assets, according to a release from Stifel announcing in June announcing the acquisition. Stifel is not named in the order.
Barclays entered the U.S. retail brokerage business in 2008 when it purchased the core businesses of Lehman Brothers during the financial crisis.