Barclays Investigated for 2008 SWF Fundraising Improprieties

In the latest regulatory headache for the UK bank, Barclays has disclosed that the Financial Services Authority is investigating four current and former employees for possible improprieties involved with fundraising in 2008 from a sovereign wealth fund.

(July 27, 2012) — Another day, another regulatory nightmare for Barclays PLC.

Buried within its 2012 interim results, the London-based bank disclosed that the Financial Services Authority (FSA), the UK financial services regulator, is investigating four current and former employees over possible disclosure failings related to 2008 capital fundraising from a Middle Eastern sovereign wealth fund. It is but the latest sign that actions taken by the bank that year to cope with the financial crisis are continuing to haunt it. Last month, the FSA levied a staggering $450 million against the bank for its acknowledged manipulation of the London interbank offered rate (Libor) in 2008.  

“The FSA has commenced an investigation involving Barclays and four current and former senior employees, including Chris Lucas, Group Finance Director,” Barclays disclosed in the filing. “The FSA is investigating the sufficiency of disclosure in relation to fees payable under certain commercial agreements and whether these may have related to Barclays capital raisings in June and November 2008. Barclays considers that it satisfied its disclosure obligations and confirms that it will cooperate fully with the FSA’s investigation.”

In 2008, Barclays managed to stave off a government bailout, unlike rivals Lloyds and Royal Bank of Scotland, in part by receiving sizeable capital injections from foreign investors. Although the scope of the FSA investigation remains unclear, most reports indicate that the regulator is honing in on multi-billion dollar investments made by the Qatar Investment Authority, the Middle Eastern country’s more than $80 billion sovereign wealth fund. The bank’s statement suggests that the FSA is looking into whether Barclays attached any sweeteners to the fund’s investments without properly disclosing them.

As a result of the fallout from the Libor scandal, Barclays has lost its chairman, chief executive officer, and chief operating officer. It also faces a series of lawsuits from institutional investors, including public pension plans in the United States, over its attempts to manipulate the rate in 2008 to lower its borrowing costs and come across as financially sound.