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Robust Compliance: The Role of Securities Lawyers at Bakhtiari & Harrison

In the intricate realm of financial regulation, maintaining a robust supervisory system is paramount to ensuring compliance and protecting investors’ interests. The recent sanctions against Barclays Capital Inc. highlight the critical need for comprehensive oversight, particularly in managing conflicts of interest and trading restrictions. At Bakhtiari & Harrison, our experienced securities lawyers are dedicated to guiding firms through these complexities, helping them implement effective compliance measures and avoid regulatory pitfalls.

Barclays Capital Inc. Sanctioned by FINRA

On April 12, 2024, Barclays Capital Inc. (CRD #19714, New York, New York) was censured and fined $700,000 by the Financial Industry Regulatory Authority (FINRA). Without admitting or denying the findings, Barclays consented to the sanctions and acknowledged several compliance failures related to its supervisory systems and conflict of interest disclosures.

Key Findings and Compliance Failures

The findings revealed that Barclays did not establish and maintain a supervisory system reasonably designed to restrict or limit trading in covered securities within research analysts’ external managed accounts. Instead, the firm relied on an unwritten procedure, instructing research analysts to obtain confirmations from their external account managers regarding compliance with trading restrictions. This approach lacked the necessary rigor, as the firm took no additional steps to verify compliance or identify any prohibited trading activities.

As a result, multiple instances occurred where research analysts failed to instruct their external account managers about trading restrictions. Consequently, some research analysts held securities of covered companies in external managed accounts, and their external account managers traded these securities inconsistently with the analysts’ recommendations. Additionally, Barclays failed to disclose the research analysts’ financial interests in securities of the subject companies in some published equity research reports.

In response to these deficiencies, Barclays implemented new written supervisory procedures (WSPs) requiring research analysts to obtain written confirmations from external account managers regarding compliance with trading restrictions. The firm also began reviewing research analysts’ external managed account statements. However, these measures were insufficient, as the firm continued to fail in identifying prohibited trading activities, leading to further disclosure failures in research reports.

Data Feed Issues and Disclosure Failures

The findings also highlighted that Barclays did not timely or consistently review trading activities in equity research analysts’ external managed accounts to identify potential securities law violations. Furthermore, the firm failed to disclose the receipt of compensation by an affiliate in equity research reports. A data feed used by Barclays to disclose conflicts of interest in its research reports was incomplete, omitting information about payments to its affiliates for non-investment banking services. This oversight led to the omission of required disclosures in equity research reports for some issuers. Barclays later corrected the data feed issue.

The Role of Securities Lawyers in Ensuring Compliance

The case of Barclays Capital Inc. underscores the vital role of securities lawyers in establishing and maintaining effective compliance systems. At Bakhtiari & Harrison, our team of expert securities lawyers provides comprehensive legal support to help firms develop and implement robust supervisory systems and WSPs. Our services include:

  1. Developing Detailed Supervisory Systems: We assist firms in creating supervisory systems that encompass all aspects of compliance, ensuring adherence to regulatory standards and minimizing the risk of violations.
  2. Implementing Effective Written Supervisory Procedures: Our securities lawyers help firms draft and implement WSPs that address specific regulatory requirements, including conflict of interest disclosures and trading restrictions.
  3. Conducting Compliance Audits: We conduct thorough audits to identify compliance gaps and recommend corrective actions, helping firms stay ahead of regulatory changes.
  4. Providing Ongoing Training and Support: Our team offers targeted training programs to ensure that all personnel understand and comply with regulatory obligations, promoting a culture of compliance within the firm.

Contact Bakhtiari & Harrison Today

For expert legal advice and support in securities law, including compliance with supervisory systems and conflict of interest disclosures, contact Bakhtiari & Harrison. Our team of experienced securities lawyers is here to provide the guidance and support you need to navigate regulatory challenges and maintain compliance. Visit our website or call us today to learn more about our services.