The Securities and Exchange Commission today announced an enforcement action requiring Barclays Capital to refund advisory fees or mutual fund sales charges to clients who were overcharged.
In a settlement of more than $97 million, Barclays agreed to settle three sets of violations that resulted in clients being overbilled by nearly $50 million. The SEC’s order finds that two Barclays advisory programs charged fees to more than 2,000 clients for due diligence and monitoring of certain third-party investment managers and investment strategies when in fact these services weren’t being performed as represented. Barclays also collected excess mutual fund sales charges or fees from 63 brokerage clients by recommending more expensive share classes when less expensive share classes were available. Another 22,138 accounts paid excess fees to Barclays due to miscalculations and billing errors by the firm.
"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 SEC’s order finds that Barclays violated Sections 206(2), 206(4) and 207 of the Investment Advisers Act of 1940 and Rule 206(4)-7 as well as Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933.
Without admitting or denying the SEC’s findings, Barclays agreed to create a Fair Fund to refund advisory fees to harmed clients. The Fair Fund will consist of $49,785,417 in disgorgement plus $13,752,242 in interest and a $30 million penalty. Barclays will directly refund an additional $3.5 million to advisory clients who invested in third-party investment managers and investment strategies that underperformed while going unmonitored. Those funds also will go to brokerage clients who were steered into more expensive mutual fund share classes.
The SEC’s investigation was conducted by Gwen Licardo of the Asset Management Unit, and the case was supervised by Valerie A. Szczepanik of the New York Regional Office. An SEC examination that led to the investigation was conducted by investment adviser examiners in the New York Regional Office.