NEW YORK (Reuters) - The U.S. securities regulator is considering legal action against Barclays over trading done while the bank’s employees were serving on bankruptcy committees, according to a regulatory filing.
The Securities and Exchange Commission (SEC) investigation looks into trading activity between 2002 and 2003 by a proprietary trading desk at Barclays, the bank said in a March SEC filing.
A separate lawsuit filed against the bank in March by a former employee alleges that Barclays’ U.S. distressed debt desk, which deals in bankrupt company bonds, traded debt after “potentially gaining nonpublic information” through bankruptcy creditor committees.
The suit was filed in March by former Barclays analyst Michael Econn in the Manhattan federal court. Econn is seeking damages for alleged discrimination by Barclays because of his assistance of the SEC.
Econn’s supervisor at Barclays asked traders on the distressed debt desk in 2002 to join bankruptcy committees for companies in which they had investments, the suit alleges.
In 2003, one such committee subpoenaed Barclays, prompting an internal investigation into the desk’s trades and bankruptcy committee involvement, according to the suit.
The SEC then investigated Barclays’ trading and bankruptcy committee involvement and issued the bank a subpoena in June 2004, according to the suit.
In March 2006, Econn testified before the SEC regarding his supervisor and the suggested suppressing of documents related to the bankrupt companies, according to the suit.
Barclays and the SEC could not immediately be reached for comment.
But Barclays said in its filing that it had cooperated with the SEC staff during its investigation and was in ongoing negotiations to resolve the matter.
It independently addressed the practices, policies and procedures at issue in 2003, before the SEC began its probe, the bank said in the filing.
It added that it does not expect the amount of any settlement with the SEC would have a significant adverse effect on its financial position or operating results.
Barclays is currently in a takeover battle against a trio of banks led by Royal Bank of Scotland for Dutch bank ABN AMRO.
Additional reporting by Paritosh Bansal