Barclays Capital agreed to pay $97 million Wednesday to settle Securities and Exchange Commission charges that the firm overcharged clients for mutual fund sales or fees to clients in its wealth and investment management business.
Barclays agreed to three sets of violations that resulted in clients being overbilled by nearly $50 million.
From September 2010 through December 2015, Barclays Capital, then a dually registered investment advisor and broker-dealer, improperly charged certain advisory clients almost $50 million in advisory fees.
During that time period, Barclays Capital “falsely represented to advisory clients that it was performing ongoing due diligence and monitoring of certain third-party managers who managed advisory clients’ assets using certain investment strategies, when Barclays Capital was not performing such due diligence,” the SEC order states.
As a result, Barclays Capital improperly charged 2,050 client accounts approximately $48 million in fees for these promised services.
Second, from January 2011 through March 2015, Barclays Capital charged 22,138 client accounts excess fees of approximately $2 million, due to miscalculations and billing errors by the firm.
Barclays also collected excess mutual fund sales charges or fees from 63 brokerage clients by recommending more expensive share classes when less expensive share classes were available, the order states.
“Barclays failed to ensure that clients were receiving the services they were paying for,” said C. Dabney O’Riordan, co-chief of the SEC Enforcement Division’s Asset Management Unit, in a statement. “Each set of clients who were harmed are being refunded through the settlement.”
Without admitting or denying the SEC’s findings, Barclays agreed to create a Fair Fund to refund advisory fees to harmed clients, which will consist of $49,8 million in disgorgement plus $13.8 million in interest and a $30 million penalty.
Barclays will directly refund an additional $3.5 million to advisory clients who invested in third-party investment managers and investment strategies that underperformed while going unmonitored, according to the SEC. Those funds also will go to brokerage clients who were steered into more expensive mutual fund share classes.