The US Securities and Exchange Commission said that Barclays Capital (BARC) has agreed to pay over $16.5M as part of a settlement resolving allegations accusing the company of failing to properly supervise two of its ex-mortgage bond traders. The men are accused of lying to clients, as well as overcharging some of them. According to the regulator, Barclays did not put into place or execute the proper supervisory procedures that could have stopped or detected the alleged residential mortgage-backed securities fraud.
The two traders, David Wong and Yoon Seok Lee, are accused of making misleading or false statements to the firm’s customers about RMBS securities, how much Barclays makes for facilitating the trades, and other pertinent information. Lee and Wong also are accused of making excessive mark-ups on certain transactions without telling customers.
The SEC said that the ex-Barclays traders’ actions, which would have occurred between 6/2009 and 12/2012, caused Barclays to earn $15.5M in profits.
The Commission found that although Barclays had the ability to identify Wong and Lee’s false and misleading statements, the firm did not spot the purported misconduct. Barclays also did not detect or examine whether certain mark-ups added were “reasonable” even though the firm had a compliance system that was supposed to flag suspect transactions for additional review.
To settle, Barclays will pay $15.5M to customers that were affected. It also has agreed a $1M penalty, over $2.9M of disgorgement, more than $500K of prejudgment interest for transactions connected to misleading or false statements, over $6M of disgorgement, and nearly $1.6M of prejudgment interest for transactions related to excessive mark-ups. The firm is not denying or admitting to the SEC’s findings by settling.
As for Lee and Wong, they too did not deny or admit to the Commission’s findings although they are settling. They did, however, agree to 12-month suspensions from being employed in the securities industry. Wong will pay a $100K fine. Lee’s fine is $200K.