More On Legal & Compliancefrom The Advisor's Professional Library
- Client Commission Practices and Soft Dollars RIAs should always evaluate whether the products and services they receive from broker-dealers are appropriate. The SEC suggested that an RIAs failure to stay within the scope of the Section 28(e) safe harbor may violate the advisors fiduciary duty to clients, so RIAs must evaluate their soft dollar relationships on a regular basis to ensure they are disclosed properly and that they do not negatively impact the best execution of clients transactions.
- Updating Form ADV and Form U4 When it comes to disclosure on Form ADV, RIAs should assume information would be material to investors. When in doubt, RIAs should disclose information rather than arguing later with securities regulators that it was not material.
Barclays was hit with a record $469.9 million fine by the Federal Energy Regulatory Commission (FERC), which also fined four of its former traders for manipulating energy rates in the western U.S. from late 2006 to 2008.
Bloomberg reported late Wednesday that FERC assessed a $435 million civil penalty, as well as ordering the bank to show cause why it should not also surrender $34.9 million in profit from its activities. It also proposed an individual penalty of $15 million for trader Scott Connelly and $1 million each for three colleagues.
“We are disappointed by the action that FERC took today and strongly disagree with the allegations made by FERC against Barclays and its former traders,” Mark Lane, a Barclays spokesman, said in a statement. “We believe that our trading was legitimate and in compliance with applicable law.”
FERC is also investigating energy trading by JPMorgan Chase & Co. and Deutsche Bank, and in February it created a division within its enforcement office specifically to police the markets.
According to FERC, the traders were willing to incur losses in the next-day electricity markets so that they could improve Barclays’ positions in the InterContinental Exchange. The filing said in part, “Staff concludes that Barclays’ conduct constitutes, at a minimum, recklessness,” the traders knew their actions were “likely unlawful,” and that they ignored warnings from Joseph Gold, a Barclays’ managing director.
FERC also said that the actions cost other buyers and sellers in energy and financial markets approximately $139.3 million.
In a notice issued April 5, FERC said the four traders—Connelly, Daniel Brin, Karen Levine and Ryan Smith—allegedly coordinated to manipulate electricity markets. Connelly should suffer the larger penalty “as the leader of the manipulative scheme,” the regulator said.
Barclays and its former traders have 30 days to respond. In Barclays’ statement, Lane said the bank will “vigorously defend this matter.”
Reuters reported earlier Wednesday that Barclays had disclosed the FERC investigation as well as another by the Justice Department and the SEC.