Barclays reaches $19.5 million settlement over $17.7 billion debt sale blunder

NEW YORK (Reuters) – Barclays (LON:) agreed to pay $19.5 million to settle a lawsuit in Manhattan by shareholders who accused the British bank of securities fraud after it sold $17.7 billion more debt than regulators allowed.

A preliminary settlement of the proposed class action was filed on Tuesday in Manhattan federal court, and requires approval by U.S. District Judge Katherine Polk Failla.

Shareholders claimed they lost money by relying on Barclays’ assurances that its policies and procedures met regulatory standards, and that the bank was committed to strong internal controls.

Barclays admitted in March 2022 that it had sold $15.2 billion more structured and exchange-traded notes in the prior five years than the $20.8 billion authorized by U.S. regulators.

Four months later, the bank increased the oversold amount to $17.7 billion, offered to repurchase the excess, and set aside 1.59 billion pounds ($2.01 billion) for the overissuance.

Barclays also restated its 2021 financial statements, with its executives characterizing the overissuance as an “entirely avoidable” and “self-inflicted” problem.

Barclays continued to deny wrongdoing in connection with the settlement, according to the court document filed on Tuesday.

In February, Failla refused to dismiss the lawsuit, saying shareholders could try to prove that Barclays officials including former CEO Jes Staley were “actionably reckless.”

She also said that while Barclays’ assurances sounded generic, they could support the shareholders’ claims because the bank’s system for tracking debt sales “did not just underperform – it did not exist.”

The lawsuit covered investors in Barclays’ American depositary receipts from Feb. 18, 2021 to Feb. 14, 2023.

Staley stepped down as Barclays’ chief executive in November 2021.

The case is In re Barclays Plc Securities Litigation, U.S. District Court, Southern District of New York, No. 22-08172.

($1 = 0.7896 pounds)