The Financial Industry Regulatory Authority has fined Barclays Capital $325,000 for failing to supervise employees' outside brokerage accounts.
According to FINRA's order, from July 2021 through June 2022, Barclays failed to establish and maintain a supervisory system, including written supervisory procedures, reasonably designed to supervise these accounts.
This resulted in the firm failing to timely collect and review account statements for prohibited trading activity in violation of FINRA Rules 3110 and 2010.
Barclay's WSPs required associated persons to disclose and receive approval to maintain a brokerage account outside of the firm.
Approximately 93% of employee outside accounts were held at member firms from which Barclays received electronic feeds of account statements that were subject to an automated review process, according to the order.
"The firm used a manual review process for the remaining 7% of outside accounts that did not use an electronic data feed, requiring either the employee or the other member firm to mail paper statements to a Barclays office," the order states.
COVID Backlog
Beginning in March 2020, Barclays’ offices were closed to employees for an extended period due to the COVID-19 pandemic.
"Resulting delays and organizational changes created a substantial backlog in unreviewed or missing account statements that the firm failed to timely address," FINRA's order states.
From July 2021 through June 2022, Barclays "failed to either collect or timely review approximately 8,200 account statements from approximately 700 employee-held outside brokerage accounts, or approximately half of all outside accounts for which the firm did not receive an electronic data feed," according to FINRA.
During the time period, "the firm’s employees executed 161 trades in these outside accounts without first obtaining preclearance of the trades," FINRA said. "These trades were not timely identified as a result of the backlog of unreviewed and missing account statements."
In June 2022, Barclays modified its review system for manually reviewed outside account statements "by establishing an electronic feed for a significant percentage of these outside accounts and a system for employees to upload statements for accounts without an electronic feed," FINRA states.
The firm, FINRA said, also completed its remedial review of the backlog of unreviewed and missing account statements.
Barclays accepted and consented to FINRA's findings without admitting or denying them.
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