It’s life under a microscope for those involved in the world’s biggest, and most fraught, takeover battle. Bloomberg reports that Barclays, Europe’s biggest underwriter of corporate bonds, allegedly used confidential information from serving on creditors’ committees to trade securities of bankrupt companies, according to people with knowledge of a three-year US government probe.
The SEC reportedly has evidence that Barclays, which is trying to merge with ABN Amro, profited from advance knowledge of market-moving developments gleaned from the bankruptcy panels. Barclays is in talks with the American regulator to settle allegations that it broke insider- trading rules, Bloomberg said.
The investigation highlights the potential for conflicts of interest as banks lend money to foundering clients while also trading their securities. Barclays has more than doubled its trading revenue from credit products, including bonds and loans, in the past two years.
Some of the trading under investigation by the SEC dates back to 2002, Bloomberg said, and those involved are no longer at the bank. Since then, default rates on high-risk bonds have declined to the lowest in a decade, according to Moody’s Investors Service.
Barclays is forecast to reach agreement with the SEC within the next few weeks and probably will have to pay a fine, Bloomberg said. The bank’s net trading income increased 56 per cent last year to £3.6bn, helping boost net income by 33 per cent to almost £4.6bn pounds.