After New York Attorney General Eric Schneiderman detailed fraud charges against Barclays PLC (ADR) (NYSE:BCS) (LON:BARC) and the operation of its dark pool, the bank is fighting back, filing a lawsuit Thursday to dismiss the case, the Wall Street Journal is reporting.
Barclays PLC claims Schneiderman’s complaint failed to identify fraud
Barclays PLC (ADR) (NYSE:BCS) (LON:BARC) claims that the New York Attorney General’s complaint failed to identify fraud, its customers were sophisticated investors and Schneiderman is overstepping its bounds and that it is the Securities and Exchange Commission who has authority in the matter. The bank argues that the Martin Act, under which the bank is charged, doesn’t apply to this case.
“Expanding the Martin Act to cover ATSs (automated trading systems) threatens conflict between it and the Securities Exchange Act of 1934,” the complaint reads. “The NYAG’s claims are an attempt to impose new regulations that are in addition to, and potentially contradict or supplant, the SEC’s judgments about the regulations to impose on this important mechanism to the U.S. economy.”
In its suit, Barclays PLC (ADR) (NYSE:BCS) (LON:BARC) claims charts that showed what are considered inaccurate statistics regarding participation of high frequency trading firms were labeled “sample” and “never said that it depicted actual data…” The New York Attorney General’s lawsuit claims a director in Barclays dark pool was fired when he questioned the aforementioned factual misrepresentation.
The bank also said the Attorney General’s complain wrongly seeks damages because no one actually suffered any harm.
Schneiderman’s allegations against Barclays
“The complaint filed last month by Attorney General Schneiderman clearly details the allegations that Barclays PLC (ADR) (NYSE:BCS) (LON:BARC) engaged in a persistent pattern of fraud and deceit, lying to its investors in order to grow its own dark pool,” New York attorney general spokesperson Damien LaVera said in a statement.
The statement noted Barclays PLC (ADR) (NYSE:BCS) (LON:BARC) heavily promoted a service called Liquidity Profiling, which the bank claimed was a “surveillance” system with the goal to identify predatory traders, rate them based on objective characteristics of their trading behavior, and hold them accountable for engaging in predatory practices.
However, contrary to those promises, the New York Attorney General claims Barclays has never prohibited any trader from participating in its dark pool, regardless of how predatory its activity was determined to be; Barclays PLC (ADR) (NYSE:BCS) (LON:BARC) did not regularly update the ratings of high-frequency trading firms monitored by Liquidity Profiling; Barclays “overrode” certain Liquidity Profiling ratings – including for some of its own internal trading desks that engaged in high-frequency trading – by assigning safe ratings to traders that were determined to be toxic.
“Barclays works closely with its regulators in all jurisdictions and will continue to cooperate with the New York attorney general,” Barclays spokesman Mark Lane was quoted as saying. “However, we do not believe that this suit is justified, and we have a duty to our shareholders, clients and staff to defend our position.