Barclays turned to Simmons & Simmons for advice during a recent Financial Conduct Authority (FCA) inquiry into deals for wealthy clients, which resulted in a £72m fine for the bank last week.
The FCA said Barclays ‘went to unacceptable lengths to accommodate’ a number of ‘ultra-high net worth clients’ in a £1.9bn deal arranged and executed by the bank during 2011 and 2012. The £72m penalty is the largest fine ever imposed by the FCA and its predecessor the FSA for financial crime failings.
The regulator found that clients involved were ‘politically exposed persons’, which meant they should have been subject to ‘enhanced levels of due diligence and monitoring’ by Barclays.
The FCA concluded that the bank chose not to follow standard procedures and failed to adequately oversee Barclays’ handling of the financial crime risks associated with the business relationship.
Barclays agreed to keep details of the transaction strictly confidential, even within the bank, and even agreed to indemnify the clients up to £37.7m if it failed to comply with confidentiality restrictions. Few people knew of the existence and location of the bank’s due diligence records that were stored on hard copy and not in Barclays’ systems.
Winning the mandate is a major coup for Simmons financial services regulatory team as Barclays’ investigatory and regulation focused work is typically outsourced to Clifford Chance (CC), which has the leading role advising Barclays on FCA-led Forex investigations.
Clifford Chance also advised Barclays on a £5.8bn rights issue back in 2013, and led for the bank during a Competition Markets Authority probe in 2014.
However, Simmons has retained a spot on the bank’s preferred legal adviser panel, which was cut by around 30% last year.
The firm also hired Barclays’ M&A chief Khasruz Zaman, who left the bank after a decade in its Canary Wharf HQ for Simmons’ London corporate team.
While firm refused to comment on the mandate, its financial regulatory investigations team includes partner Richard Sims, who previously served at the enforcement division of the Financial Services Authority.
Barclays agreed to settle at an early stage of the FCA’s investigation and subsequently qualified for a 30% discount, which does not apply to the £52.3m in revenue that Barclays generated from the deal, which has been disgorged as part of the overall penalty.
FCA director of enforcement and market oversight Mark Steward said: ‘Barclays ignored its own process designed to safeguard against the risk of financial crime and overlooked obvious red flags to win new business and generate significant revenue. This is wholly unacceptable.
Firms will be held to account if they fail to minimise financial crime risks appropriately and for this reason the FCA has required Barclays to disgorge its revenue from the transaction.’
A senior partner at a City firm said: ‘This is another example of a misjudgement having very serious consequences. We will see regulators bashing people for making serious mistakes.’
sarah.downey@legalease.co.uk