RiskSeptember 29, 2022

Florida Pension Funds Sue Barclays Over $17.6 Billion Debt Over-Issuance

The Miami pensions call the bank’s failure to prevent massive error ‘deliberately reckless.’

Reported by Michael Katz

Two Florida pension plans are suing Barclays, alleging that the company defrauded investors by failing to disclose in a Securities and Exchange Commission filing that subsidiary Barclays Bank had erroneously over-issued $17.64 billion worth of debt.

“Given the potential exposure to the securities laws and legal liability from the over-issuance of securities,” says the lawsuit, “the failure to have controls in place to account for the number of securities issued against the number of securities registered is such an elementary failure of internal control that is so obvious as to be deliberately reckless.”

The class action lawsuit was filed in the U.S. District Court for the Southern District of New York by the City of North Miami Beach Police Officers’ and Firefighters’ Retirement Plan and the City of North Miami Beach General Employees’ Retirement Plan. The pension funds claim they suffered financial losses when the share price of Barclays’ American depositary receipts fell as a result of the error.

The complaint alleges that Barclays’ internal controls over its financial reporting were faulty, and that “there was a material weakness in those controls” when on February 18 subsidiary Barclays Bank issued and sold more than $17.6 billion in unregistered securities over and above the maximum amount of securities registered in two of its shelf registration statements.

“The over-issuance and sale of these unregistered securities was also a violation of U.S. securities laws and/or SEC regulations, and subjected Barclays to legal liability and claims of rescission,” says the complaint.

The lawsuit also alleges that two of Barclays’ 2021 quarterly earnings releases—one that was published the same day as the over-issuance and the other five days later—were “materially false and misleading” because they did not mention the error. The complaint says Barclays informed investors in those releases that the company’s internal controls over its financial reporting were effective, but alleges that Barclays’ “internal controls over financial reporting were not effective, and there was a material weakness in those controls.”

Representatives for Barclays could not immediately be reached for comment.