Listing regime – FCA fine for breaches of the Listing Rules

The FCA has fined Barclays plc £30 million and Barclays Bank plc £10 million for breaches of the Listing Rules. The breaches relate to the failure to disclose certain arrangements with Qatari entities as part of Barclays’ capital raisings in 2008. Barclays originally said it would appeal the fines, which were provisionally announced in 2022. However, following settlement discussions with the FCA (which included the fine for Barclays plc being reduced from £40 million to £30 million) and whilst saying it does not accept the FCA’s findings, it withdrew its appeal to the Upper Tribunal.

Background

The fines relate to two capital raisings undertaken during the global financial crisis in June and October 2008 by Barclays plc (the listed company) and Barclays Bank plc (the retail bank which also has securities admitted to listing) to raise up to £4.5 billion and £7.3 billion respectively. A small number of ‘anchor investors’, including the Qatar Investment Authority (QIA), agreed to participate in the capital raisings, in return for which they received commission. The QIA (via two investment entities, Qatar Holdings LLC (QH) and Challenger Universal Ltd) agreed to invest up to £2.3 billion, representing over 50% of the June fund raising and 31% of the October fund raising.

At the same time as the capital raisings, Barclays entered into two advisory agreements with QH in June and October 2008, pursuant to which QH was to be paid fees of £322 million in return for the provision of certain services. The FCA found that the advisory agreements formed part of the basis on which the Qatari entities agreed to participate in the capital raisings. The announcements and public documents published in relation to the capital raisings did not disclose the fees to be paid to QH under the agreements nor any connection to the Qatari entities’ participation in the capital raisings (the existence of the October agreement was also not disclosed in the documents published in relation to the October capital raising).

The FCA’s findings

The FCA found that Barclays had breached the following provisions of the Listing Rules which were in force at the time:

• Breach of LR 1.3.3R (now UKLR 1.3.3R) – The FCA held that Barclays failed to take reasonable care to ensure that the information contained in the announcements and prospectuses was not misleading, false or deceptive and did not omit anything likely to affect its import. It said that the advisory agreements formed part of the basis on which the Qatari entities agreed to participate in the capital raisings, and that Barclays was aware of this but did not disclose the fees paid under the agreements, nor their connection to the Qatari entities’ participation in the capital raisings.  Although Barclays received legal advice that it did not need to disclose any further information in relation to the June Agreement (and any information in relation to the October Agreement), the FCA held that there had been a failure to take reasonable care to comply with the obligations under LR 1.3.3R on the basis that Barclays did not consider its obligations under LR 1.3.3R or seek specific advice on these obligations and that the external lawyers were not fully informed of the connection between the agreements and the capital raisings when advising on the disclosures.
• Breach of LR 13.3.1R(3) (now UKLR 10.3.1R) – By not including details of the fees payable to QH under the October Agreement, and any connection to the October capital raising, in its shareholder circular in November 2008, the FCA said that the circular did not contain all information necessary to allow its shareholders to make a properly informed decision as to the voting action required of them in connection with the October capital raising, in breach of LR 13.3.1R(3).
• Listing Principle 3 (now Listing Principle 4 in UKLR 2.2.1R) – The FCA concluded that Barclays’ breach of LR 1.3.3R (in relation to the October capital raising) and Barclays plc’s breach of LR 13.3.1R(3) were committed recklessly, and therefore that Barclays plc did not act with integrity towards its actual and potential shareholders, in breach of Listing Principle 3.

None of the current Barclays board or senior management were involved in the events leading to the fines and the FCA acknowledges in its press release that “The most recent executive leadership, with the support of the current Barclays Board, has made significant progress in implementing changes to Barclays’ systems and controls.”