Barclays Hit with $1 Million FINRA Fine over Index Data
Barclays Capital, Inc. has agreed to pay a $1 million fine to settle Financial Industry Regulatory Authority (FINRA)claims that the firm issued flawed data on a bond index it published and then failed to fix for months after discovering the problem.
According to FINRA complaint, Barclays’ published inaccurate coupon return information for a bond index, known as the Pan Euro ABS Floating Rate Index. This index, which is one of nearly 100 that Barclays publishes and was used by institutional investors to monitor the performance and credit quality of the European asset-backed securities market.
For three-and-a-half years, after Barclays introduced changes to the index, it consistently understated the returns on by approximately 4.3 percent. Specifically, the changes caused data on coupon payments for some of the index’s component bonds to turn negative, which FINRA said was not likely. Even though FINRA notified Barclays of its concerns, the matter was not brought to the attention of the management of the Barclays unit producing the index until a subscriber and someone else complained in May 2013. The delay in the acknowledgement of the problem as well as the continued publication of the inaccurate data lead to the levy of the fine.
Knowing this, however, Barclays continued to publish the index with the inaccurate information without disclosing the information to investors. Finally, in February 2014, a couple of months after the data glitch was fixed, Barclays restated the index and disclosed that it had been understating coupon returns. At that point, Barclays also informed a European regulator about the issue according to FINRA. “By continuing to publish the inaccurate index without appropriate disclosure to its subscribers from July 2013 through Feb. 20, 2014, Barclays violated FINRA Rule 2010.” FINRA also cited Barclays for failing to have a system in place to catch and prevent the release of inaccurate information to customers.
As is customary in such actions, Barclays agreed to settle the claim without admitting or denying wrongdoing.
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