Barclays Gets Fund-Raising Charge Clearance From UK Court

The U.K’s Crown Court dismissed all the charges brought by the Serious Fraud Office (SFO) against Barclays (LON:BARC) PLC (NYSE:BCS) , relating to its series of fund raisings from Qatar Holding LLC in 2008.

Details of the Fund Raising

Back in 2008, during the peak of the financial crisis, Barclays made a series of funding agreements with Qatar Holding. The company raised nearly £12 billion through the sale of its shares to Qatar Holding, particularly in June and October.

With the help of the capital raised, Barclays was able to avoid a government bailout during the crisis, while other U.K.-based banks — including The Royal Bank of Scotland Group (LON:RBS) plc (NYSE:RBS) and Lloyds Banking Group (LON:LLOY) plc (NYSE:LYG) — had to accept government bailouts.

However, later it emerged that a loan facility worth $3 billion was made available to Qatar Holding by Barclays within a few months of the deal closure, thereby effectively lending the client money to finance its own investments.

While there is nothing wrong with raising capital through the sale of shares, Barclays failed to disclose the actual nature of the plan. The SFO findings revealed that an advisory service agreement (ASA), signed with Qatar Holding at the time of the fundraisings in June 2008, was part of its prospectus, while the extension of the ASA for fundraising (mainly structured as debt deal on Qatari side) in October was not disclosed.

Thus, in June 2017, the SFO charged Barclays and its former CEO John Varley, former investment banking chairman Roger Jenkins, Barclays’ Wealth CEO Thomas Kalaris, and the former head of the bank's financial institutions group, Richard Boath, with conspiracy to commit fraud and illegal financial assistance.

While the charges against the bank have been dismissed, individuals still face the allegations.

In fact, a spokesman for SFO said, “We are likely to seek to reinstate the charges by applying to the High Court.”

Barclays continues to deal with misappropriations in its legacy business. While several global banks — including Royal Bank of Scotland, Deutsche Bank AG (NYSE:DB) and Credit Suisse (SIX:CSGN) Group AG — have moved past their legacy business mishandlings by resolving the issues, Barclays has been facing several legal charges and investigations.

Also, regulatory reforms, in response to the persistent weaknesses in the global financial sector, along with increased regulatory scrutiny, will require Barclays to maintain an increased capital level, which is likely to limit its business flexibility.

Despite these legal and other concerns, Barclays’ shares on the NYSE have rallied 4.7%, so far this year, against the industry's decline of 6.2%.

Currently, Barclays carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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