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Screenshot of a breaking news alert e-mail from Q2 2017
Yesterday, ASIC accepted an enforceable undertaking (EU) from three Barclays foreign financial service providers (FFSPs):
- Barclays Capital Inc. (BCI) domiciled in the United States of America
- Barclays Capital Asia Limited (BCAL) domiciled in Hong Kong, and
- Barclays Capital Securities Limited (BCSL) domiciled in the United Kingdom,
collectively ‘the Barclays entities.’
As part of the terms of the EU, the Barclays entities will contribute $500,000 to The Ethics Centre for research and development into the provision of financial services to Australian clients.
The EU was accepted by ASIC following concerns about significant breaches of the conditions of the ASIC class order licensing exemptions relied on by the Barclays entities, including the failure to notify ASIC of breaches within the required time.
The Barclays entities failed to disclose to clients that they were exempt from holding an Australian Financial Services licence (AFSL) and are regulated by the relevant overseas regulatory authority. BCI and BCAL are not able to demonstrate that the requisite disclosure was made to clients since first commencing reliance on the ASIC class order licensing exemption, in 2004 and 2006 respectively. BCSL is not able to demonstrate that the requisite disclosure to clients had been made across a 10 year period from 2004 to 2014. BCI also failed to notify ASIC of certain offshore investigation and enforcement matters within the time required of FFSPs.
ASIC was particularly concerned that the Barclays entities failed to report these material breaches within the 15-day time frame and as a consequence excluded themselves automatically from the benefit of the ASIC class order licensing exemptions.
To maintain the availability of the services provided by the Barclays entities to the Australian wholesale sector ASIC has granted the Barclays entities conditional individual relief from the obligation to hold an AFSL.
The duration and number of breaches together with the failure to report breaches in time demonstrated serious, systemic weaknesses in the compliance controls implemented by the Barclays entities to meet their Australian regulatory obligations.
Under the terms of the EU the Barclays entities must engage an ASIC approved independent expert to, among other things:
- review and test the compliance framework implemented by the Barclays entities following the reporting of breaches, to meet the relevant conditions of the ASIC licensing exemption; and
- report any deficiencies and make recommendations on how to rectify those deficiencies to ensure effective and enduring compliance with the relevant conditions of the ASIC licensing exemption.
ASIC Commissioner Cathie Armour said:
Foreign financial services providers relying on a class order licensing exemption must have effective and enduring measures to ensure compliance with the conditions set out in these instruments, including the fundamental obligations relating to disclosure and reporting.
Entities that fail to self-report a breach of their obligations to ASIC within the required time will be subject to automatic and indefinite exclusion from the licensing exemption provided by these instruments.