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REGULATION/LEGISLATION

Barclays to refund advisory client overcharges in $97.1 million SEC settlement

Barclays will pay $97.1 million to settle charges brought by the Securities and Exchange Commission that its Barclays Capital investment banking unit overcharged advisory clients by nearly $50 million and made numerous accounting errors from 2010 to 2015, the agency announced Wednesday.

Barclays agreed to the settlement without admitting or denying the charges, and agreed to refund advisory fees or mutual fund sales charges to overcharged clients.

The three sets of violations covered in the agreement include two Barclays advisory programs charging fees to more than 2,000 clients for due diligence and monitoring of certain third-party investment managers and investment strategies, despite those services not being performed as represented; recommending more expensive share classes and collecting excess mutual fund sales charges or fees from 63 brokerage clients, including retirement plans and charitable organizations; and charging 22,138 accounts excess fees due to miscalculations and billing errors.

The activities in the SEC order took place from September 2010 through December 2015. SEC officials cited several reasons for the overcharges. “First, Barclays Capital had inadequate controls around valuation of advisory client assets, leading to, in some cases, stale prices for securities, or overpriced securities. As a result, Barclays Capital used inaccurate and, in some cases, inflated market values to calculate its advisory fees for certain client accounts. Second, Barclays Capital used multiple disparate data and account management systems and relied, to a large degree, on manual processes and manual workarounds for specific processes, which led to human error, and incorrect calculations,” the order said.

Barclays agreed to create a Fair Fund to refund the advisory fees, with $49.8 million in disgorgement, $13.8 in interest and a $30 million penalty. Another $3.5 million will go to advisory clients invested in third-party investment managers and investment strategies that underperformed while going unmonitored and to brokerage clients who were steered into more expensive mutual fund share classes.

The company declined to comment.