Barclays Capital Inc has agreed to pay a fine of $700,000 as a part of a settlement with the Financial Industry Regulatory Authority (FINRA).
Under FINRA rules relating to research analyst conflicts of interest, a firm must have policies and procedures prohibiting an analyst from trading in a security in a manner inconsistent with the analyst’s published rating of that security. In addition, a member must disclose in an equity research report ifan 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 supervisory system, including written supervisory procedures (WSPs), reasonably designed to comply with these rules.
In particular, Barclays failed to timely or reasonably monitor its research analysts’ managed brokerage accounts for compliance with trading restrictions on equity research analysts or to determine if they held securities in companies they covered. As a result, the firm failed to identify and did not disclose in 99 equity research reports that analysts held securities of a covered company and did not discover three instances in which an analyst’s external account manager traded in a manner inconsistent with the analyst’s most recently published recommendation on a company.
Accordingly, the firm violated FINRA Rules 2241(b)(2)(J), 224l(c)(4)(A), 31 lO(a) and (b)(l), and 2010.
The firm’ s WSPs also did not include a process for the review of securities transactions in equity research analysts’ external managed accounts reasonably designed to identify potential violations of securities laws, including potential market manipulation and insider trading. The firm accordingly violated FINRA Rules 3110(d) and 2010.
From at least April 2021 through March 2022, the firm failed to obtain data for certain clients of Barclays affiliates to determine whether it needed to disclose specified 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 prior 12 months.
The firm accordingly violated FINRA Rules 2241(c)(4)(D) and 2010.
In addition to the $700,000 fine, the respondent consented to the imposition of a censure.
