Skip to main content

Tainted Barclays agrees to pay $70M for misleading investors and violating securities laws

A press release today, excerpted below, explains that Barclays Capital, already a felon paying huge fines for exchange rate manipulation, will pay $70 million to the state of New York and the Securities and Exchange Commission as a penalty for misleading investors and violating securities laws regarding high-frequency trading.

Notably, Barclays "exposed its clients to the predatory traders from whom it promised to protect them," according to the press release from New York State Attorney General Eric Schneiderman.

Here's coverage from the Times and Reuters, and Bloomberg. Below is the press release.
A.G. Schneiderman Announces Landmark Resolutions With Barclays And Credit Suisse For Fraudulent Operation Of Dark Pools; Combined Penalties And Disgorgement To State Of New York And Sec Of Over $154 Million
Barclays To Pay Total Penalty Of $70 Million – Largest Penalty Ever Levied On A Dark Pool Operator; Admits To Core Facts In The Attorney General’s Lawsuit; Admits To Violating Securities Laws; Agrees To Install Independent Monitor To Oversee Reforms To Its Electronic Trading Business
NEW YORK – Attorney General Eric T. Schneiderman today announced that Barclays Capital Inc. and Credit Suisse Securities (USA) LLC will pay a combined $154.3 million to the State of New York and the SEC to settle investigations into false statements and omissions made in connection with the marketing of their respective dark pools and other high-speed electronic equities trading services. Dark pools are private exchanges for trading securities that are not viewable by the general public and are completed outside of public stock exchanges.

Barclays admitted to core facts set forth in the Attorney General’s Complaint from June 2014 alleging misrepresentations about how it operated its dark pool, "Barclays LX," including that it misled investors and violated securities laws. Barclays will pay a penalty of $70 million, split equally between the State of New York and the SEC, and will install an independent monitor to ensure proper operation of its electronic trading division.

..."These cases mark the first major victory in the fight to combat fraud in dark pool trading and bring meaningful reforms to protect investors from predatory, high-frequency traders,"Attorney General Schneiderman said. "This effort, which began when we first sued Barclays, includes coordinated and aggressive government action which forced admissions of wrongdoing and record fines. We will continue to take the fight to those who aim to rig the system and those who look the other way."
In March of 2014, Attorney General Schneiderman called for tougher regulatory oversight and market reforms to eliminate unfair advantages provided to high-frequency traders at trading venues. In a speech delivered at New York Law School on March 18, 2014, the Attorney General committed to cracking down on “fundamentally unfair and potentially illegal” arrangements that give certain traders early access to market-moving information at the expense of the rest of the market. As part of those efforts, Attorney General Schneiderman launched investigations into Credit Suisse and Barclays, the largest and second largest dark pool operators at the time, in order to expose illegal practices and ensure a level playing field for all investors.

Since that time, the Attorney General has reached agreements with Thomson Reuters, Business Wire, and others to end business practices that provided high frequency traders an unfair advantage.

Barclays
As set forth fully in the Amended Complaint filed in New York Supreme Court in February 2015, the Attorney General uncovered evidence that Barclays made knowing and systematic misrepresentations to investors about how, and for whose benefit, Barclays operated its dark pool called “Barclays LX,” and exposed its clients to the predatory traders from whom it promised to protect them. As a result of that fraud, Barclays grew its dark pool to be the second largest in the United States.
In January 2015, the court upheld the Attorney General’s jurisdiction over Barclays’ fraudulent conduct when it denied Barclays’ motion to dismiss the Attorney General’s Complaint. In today’s resolution, Barclays admits that it violated the securities laws by making material misrepresentations to investors regarding a wide range of issues, including:
  • Barclays misrepresented how it monitored its dark pool for high-speed predatory trading. Despite repeatedly telling clients that it used sophisticated tools to monitor for “latency arbitrage,” and ran weekly surveillance reports, Barclays in fact did neither.
  • Barclays’ “Liquidity Profiling” service, which was supposed to allow traditional investors to opt-out of trading with the most aggressive high-speed traders in Barclays’ dark pool, was in fact riddled with exceptions for favored high-speed clients, meaning that traditional traders who thought they were trading only against the safest counterparties were in fact trading with some of the most aggressive and predatory high-speed traders in Barclays’ pool.
  • Barclays overrode the “Liquidity Profiling” rating of its internal high-frequency trading desk, making it appear to be a “safe” trading partner, when in fact Barclays knew it to be among the most predatory in its pool.
  • For several years, Barclays disseminated to investors an analysis of the trading in its dark pool, from which Barclays intentionally deleted the largest, most aggressive trader, in order to make its pool appear safer than it really was.
  • Barclays repeatedly told investors that it used the fastest market data feeds from all major exchanges to price trades in its pool; in fact, Barclays did not do so.
Barclays also acknowledges, consistent with the court’s ruling, the Attorney General’s jurisdiction under New York’s Martin Act. Barclays will also install an independent monitor to conduct an in-depth review of Barclays’ electronic trading business, and to propose further reforms to ensure that the company complies with New York law.

Those undertakings are in addition to actions taken by Barclays in the immediate wake of the filing of the lawsuit, which included the suspension from duties of William White, then-head of the Electronic Trading Division, and the removal of David Johnsen, White’s second-in-command, from his formal supervisory roles over the electronic trading division.

The Attorney General also thanked the Barclays insiders that provided valuable assistance with the investigation. “It is critically important that those with knowledge of fraudulent conduct continue to contact my Office, to share what they know in confidence. As today’s resolution with Barclays illustrates, my Office takes seriously all allegations of wrongdoing and takes appropriate action. I personally thank the individuals who spoke out against the misconduct at Barclays for their valuable service to the people of the State of New York.”

Comments

Popular posts from this blog

Barclays Center/Levy Restaurants hit with suit charging discrimination on disability, race; supervisors said to use vicious slurs, pursue retaliation

The Daily News has an article today, Barclays Center hit with $5M suit claiming discrimination against disabled, while the New York Post headlined its article Barclays Center sued over taunting disabled employees.

While that's part of the lawsuit, more prominent are claims of racial discrimination and retaliation, with black employees claiming repeated abuse by white supervisors, preferential treatment toward Hispanic colleagues, and retaliation in response to complaints.

Two individual supervisors, for example, are charged with  referring to black employees as “black motherfucker,” “dumb black bitch,” “black monkey,” “piece of shit” and “nigger.”

Two have referred to an employee blind in one eye as “cyclops,” and “the one-eyed guy,” and an employee with a nose disorder as “the nose guy.”

There's been no official response yet though arena spokesman Barry Baum told the Daily News they, but take “allegations of this kind very seriously” and have "a zero tolerance policy for…

Behind the "empty railyards": 40 years of ATURA, Baruch's plan, and the city's diffidence

To supporters of Forest City Ratner's Atlantic Yards project, it's a long-awaited plan for long-overlooked land. "The Atlantic Yards area has been available for any developer in America for over 100 years,” declared Borough President Marty Markowitz at a 5/26/05 City Council hearing.

Charles Gargano, chairman of the Empire State Development Corporation, mused on 11/15/05 to WNYC's Brian Lehrer, “Isn’t it interesting that these railyards have sat for decades and decades and decades, and no one has done a thing about them.” Forest City Ratner spokesman Joe DePlasco, in a 12/19/04 New York Times article ("In a War of Words, One Has the Power to Wound") described the railyards as "an empty scar dividing the community."

But why exactly has the Metropolitan Transportation Authority’s Vanderbilt Yard never been developed? Do public officials have some responsibility?

At a hearing yesterday of the Brooklyn Borough Board Atlantic Yards Committee, Kate Suisma…

No, security guards can't ban photos. Questions remain about visibility of ID/sticker system.

The bi-monthly Atlantic Yards/Pacific Park Community Update meeting June 14, held at 55 Hanson Place, addressed multiple issues, including delays in the project, a new detente with project neighbors,concerns about traffic congestion, upcoming sewer work and demolitions, and an explanation of how high winds caused debris to fly off the under-construction 38 Sixth Avenue building. I'll have more coverage.
Security issues came up several times at the meeting.
Wayne Bailey, a resident who regularly takes photos and videos (that I often use) of construction/operations issues that impact residents, asked representatives of Tishman Construction if the security guard at the sites they're building works for them.
After Tishman Senior VP Eric Reid said yes, Bailey asked why a guard told him not to shoot video of the site, even though he was on a public street.

"I will address it with principals for that security firm," Reid said.
Forest City Ratner executive Ashley Cotton, the …

Barclays Center event June 11 to protest plans to expand Israeli draft; questions about logistics

At right is a photo of a poster spotted in Hasidic Williamsburg right. Clearly there's an event scheduled at the Barclays Center aimed at the Haredi Jewish community (strict Orthodox Jews who reject secular culture), but the lack of English text makes it cryptic.

The website Matzav.com explains, Protest Against Israeli Draft of Bnei Yeshiva Rescheduled for Barclays Center:
A large asifa to protest the drafting of bnei yeshiva in Eretz Yisroel into the Israeli army that had been set to take place this month will instead be held on Sunday, 17 Sivan/June 11, at the Barclays Center in Downtown Brooklyn, NY. So attendees at a big gathering will protest an apparent change of policy that will make it much more difficult for traditional Orthodox Jewish students--both Hasidic (who follow a rebbe) and non-Hasidic (who don't)--to get deferments from the draft. Comments on the Yeshiva World website explain some of the debate.

The logistical questions

What's unclear is how large the ev…

Atlantic Yards/Pacific Park graphic: what's built/what might be coming (post-dated pinned post)

Click on graphic to enlarge. This is post-dated to stay at the top of the blog. It will be updated as announced configurations change and buildings launch. The August 2014 tentative configurations proposed by developer Greenland Forest City Partners will change, and the project is already well behind that tentative timetable.


Not quite the pattern: Greenland selling development sites, not completed condos

Real Estate Weekly, reporting on trends in Chinese investment in New York City, on 11/18/15 quoted Jim Costello, a senior vice president at research firm Real Capital Analytics:
“They’re typically building high-end condos, build it and sell it. Capital return is in a few years. That’s something that is ingrained in the companies that have been coming here because that’s how they’ve grown in the last 35 years. It’s always been a development game for them. So they’re just repeating their business model here,” he said. When I read that last November, I didn't think it necessarily applied to Atlantic Yards/Pacific Park, now 70% owned (outside of the Barclays Center and B2 modular apartment tower), by the Greenland Group, owned significantly by the Shanghai government.
A majority of the buildings will be rentals, some 100% market, some 100% affordable, and several--the last several built--are supposed to be 50% market/50% subsidized. (See tentative timetable below.)

Selling development …

Atlanta's Atlantic Yards moves ahead

First mentioned in April, the Atlantic Yards project in Atlanta is moving ahead--and has the potential to nudge Atlantic Yards in Brooklyn further down in Google searches.

According to a 5/30/17 press release, Hines and Invesco Real Estate Announce T3 West Midtown and Atlantic Yards:
Hines, the international real estate firm, and Invesco Real Estate, a global real estate investment manager, today announced a joint venture on behalf of one of Invesco Real Estate’s institutional clients to develop two progressive office projects in Atlanta totalling 700,000 square feet. T3 West Midtown will be a 200,000-square-foot heavy timber office development and Atlantic Yards will consist of 500,000 square feet of progressive office space in two buildings. Both projects are located on sites within Atlantic Station in the flourishing Midtown submarket.
Hines will work with Hartshorne Plunkard Architecture (HPA) as the design architect for both T3 West Midtown and Atlantic Yards. DLR Group will be t…