Barclays share price falls as wealth management arm Barcap is slapped with $13.75m penalties
Barclays shares slumped 0.7 per cent to 220.95p per share this morning, after a US regulator found its former wealth and investment management arm made unsuitable mutual fund switches between 2010 and 2015.
The US financial industry regulatory authority (Finra) ordered Barclays Capital to pay more than $10m (£6.7m) in compensation to the customers affected, and a fine of $3.75m. Barclays declined to comment.
Unsuitable mutual fund switches occur when the benefits of swapping one fund for another are outweighed by the transaction costs, according to Finra's definition.
Finra said Barclays failed to sufficiently prevent unsuitable mutual fund switching, or meet obligations regarding the sale of mutual funds to retail or brokerage customers.
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Over a five-year period, there were more than 6,100 unsuitable switches leading to customer losses of around $8.63m.
“The proper supervision of mutual fund switching and breakpoint discounts is essential to the protection of retail mutual fund investors, and this case highlights Finra's commitment to ensuring that firms meet these obligations," Brad Bennett, Finra's executive vice president and chief of enforcement, said.
In concluding the settlement, Barclays neither admitted nor denied the charges, but consented to the entry of Finra's findings.
Barclays' wealth and investment management unit was sold to US broker Stifel earlier this month, as the company renews its focus on investment banking under current chief exec and former JP Morgan senior exec Jes Staley.
In 2012, the bank's rebrand separated its banking divisions – Barclays Capital, Corporate and Wealth – which were scrapped in favour of a single operation run under the Barclays umbrella.