The New York-based investment banking division of Barclays was fined $2.5 million as part of a settlement with the Financial Industry Regulatory Authority (FINRA) addressing allegations it failed to accurately report over-the-counter (OTC) options positions in more than 4 million instances.
Barclays Capital (now Barclays Corporate and Investment Bank) failed to reasonably supervise its large options positions reporting (LOPR) system, which was hampered by four separate coding errors, according to FINRA’s settlement published Tuesday. The alleged issues resulted in 4.3 million violations of FINRA Rules 2360(b)(5) regarding options positions and 2010 on principles of trade.
The details: The four coding errors existed over varying periods ranging four to eight years from January 2011 through December 2022, according to FINRA. They included:
- Barclays Capital failing to aggregate positions on the same side of the market covering the same underlying security or index if certain features of the positions did not match in 3.6 million instances.
- Barclays Capital failing to report exchange-traded fund option positions in approximately 392,000 instances.
- Barclays Capital failing to accurately report quantities of certain OTC option positions held in firm accounts in approximately 300,000 instances.
- Barclays Capital failing to report OTC options positions in approximately 24,000 instances.
FINRA faulted the firm for not having supervisory systems in place reasonably designed to achieve compliance with the self-regulatory organization’s options positions rules. Alleged deficiencies included not conducting reviews to determine whether all positions were properly aggregated, not ensuring reportable positions were reported, and not determining whether positions were reported with the correct trade date.
Compliance considerations: In its settlement, FINRA cited other actions it has taken against firms for similar alleged violations, including a $750,000 penalty assessed against Barclays Capital in January 2014 for failing to report positions to the LOPR in more than 1.47 million instances and submitting inaccurate reports in more than 700,000 instances.
Barclays declined to comment. The firm neither admitted nor denied FINRA’s findings.