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Barclays loses landmark case against FSA over third party losses

by Daniel Grote on Feb 28, 2013 at 10:48

Barclays loses landmark case against FSA over third party losses

Barclays has lost its landmark bid in the Supreme Court to force the Financial Services Authority (FSA) to cover the losses it has incurred as a result of a boiler room scam.

Barclays ran six bank accounts for Sinaloa Gold, a boiler room operated that gathered more than £1 million from victims.

In December 2010 the FSA obtained £127,000 from Sinaloa through a freezing order. In imposing an injunction, the FSA undertook to cover both costs and losses incurred by third parties, such as Barclays. However, it then applied to have the commitment to cover losses removed. That application was refused in the High Court, but granted after that decision was appealed.

Barclays had appealed in the Supreme Court, but lost the case.

Shane Gleghorn, head of commercial disputes at law firm Taylor Wessing, said the decision opened the door to a more litigious regulator.

'This important judgement will give the City regulator more confidence to pursue those suspected of wrongdoing because the FSA will be cushioned from potential legal claims by third parties for damages suffered as a consequence of complying with the freezing injunction,' he said.

19 comments so far. Why not have your say?

JM Keynes

Feb 28, 2013 at 11:07

I know I'm a voice in the wilderness, but this should be viewed as bad news, yet another nail in the coffin of British banking.

By the time the FSA has finished, the financial services industry will be crippled.

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Paul Barnard

Feb 28, 2013 at 11:28

If it hadn't been for Gordon Brown in 2008, the financial services industry of the sort typified by Barclays would have crippled to country.

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Man in Black

Feb 28, 2013 at 11:50

@Paul

Not sure what you mean. (a) Barclay's didn't need bailing out and remained solvent, and (b) Gordon Brown *did* manage to cripple the country through mis-management of the Bank sector.

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David McCabe 1

Feb 28, 2013 at 12:00

@ Paul - wasn't it Brown's (& Blair's) "light touch" approach to bank regulation that was a significant contributing factor to the mess?

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John Smyth 3

Feb 28, 2013 at 12:01

@ Man in Black

Please get your facts right. Barclays did need bailing out but instead of accepting a taxpayer bail out it ran off to the middle east and was bailed out with some dubious transactions which are under investigation at present. After being bailed out they have taken advantage of the cheap money loaned to them by the B of E which is taxpayers money.

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Gerry Duffy

Feb 28, 2013 at 12:10

@ D McCabe: Brown & Blair were guilty of an excessively "light Touch" regulatory system but please remember that, at the time, the Conservative party were demanding even less regulation. A plague on both their houses.

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Knoddy

Feb 28, 2013 at 12:12

Good news. I like it when Barclays gets battered!

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Man in Black

Feb 28, 2013 at 12:21

@John

My facts are right: Barclay's didn't need a bailout and it didn't take a bailout.

The FSA increased capital adequacy rules during this time, and Barclays (being a solvent Bank) was able to raise money privately. That's not a bailout.

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Hickky

Feb 28, 2013 at 13:02

I can't think of what third party costs Barclays could have just by freezing the accounts of one set of crooks. Barclays should be aiding the authorities to weed out these criminals who are bismerching the already blackened name of UK financial services. The same computer algorythms that weed out suspicious transactions on a Barclaycard should be applied to ordinary accounts to attempt to indenify wrongdoing.

Barclays did not need a bailout, something that upset Gordon Brown who then sent his henchmen in senior positions within government departments,regulatory and legal orginisations to get them. This mantra still goes on and Barclays are still the bank to shout at. What about RBS, Halifax (HBOS) Northern Rock, Glitnir etc.? They cost us dearly as taxpayers, far worse than the arrogant Barclays.

in any case, the question remains, why did Barclays seek a supreme court decision fighting what it knows to be just? What costs, apart from opening up its records to the authorities, could it possably have? If you suggest they could get paid prospective profits attained from a million pound illegal deposit from the regulator, which we pay for, spare me! I hope Barclays have to pay FSA costs, and a penalty for bringing unnecessary litigation. The penalty to be paid in part from the firm of lawyers that advised them to proceed.

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Keith Cobby

Feb 28, 2013 at 13:05

Don't you think if Gordon Brown really had saved the world he would be continually in the media instead of hiding away?

"No return to boom or bust" will be his epitaph.

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Julian Stevens

Feb 28, 2013 at 13:34

Is it morally acceptable for the FSA to be allowed, even by a court, to renege on its undertaking to cover both costs and losses incurred by third parties, such as Barclays?

Methinks an Independent Regulatory Oversight Committee would decree that it jolly well isn't.

But then we don't yet have such a Committee and neither APFA or the TSC or anybody else seems to be making any effort for such a Committee to be created, so the FSA will remain at liberty to do whatever it damned well pleases without being accountable to anyone.

Yeah, we know we gave this undertaking, changed our mind, got a judge to let us off the hook but there's nothing you or anyone else can do about it so go away and stop yapping.

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John Smyth 3

Feb 28, 2013 at 13:49

@ Man in Black

Sorry old boy but you are either in public relations for Barclays, employed by them or have a strange idea of what a bust bank is. They were bust.

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Compliance Officer

Feb 28, 2013 at 13:53

And Barclays' due diligence befofre operating accounts for conmen was what?

As by definition the funds passing through were proceeds of crime then one might reasonably ask why the weight of the AML rules has not been visited uopn them.

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stephen lyth

Feb 28, 2013 at 14:08

Eat that Banker's

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Alan Lakey

Feb 28, 2013 at 14:09

Definition of a parasite : An organism that lives on or in a different kind of organism (the host) from which it gets some or all of its nourishment. Parasites are generally harmful to their hosts, although the damage they do ranges widely from minor inconvenience to debilitating or fatal disease

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Hickky

Feb 28, 2013 at 14:10

@ Smithy three sticks

I am glad you are not my accountant! They were not bust under anybodys criteria. yes they needed to access further funding to continue under the changing requirements, but to discribe that as bust is lunacy. If a company needs money to finance operations and the total level of borrowing is higher than the company valuation, then the resultant bond will be classified as sub investment grade, or junk. This does not mean the bank is bust!

The recieved opinion is that HBOS were within 24 hours of having to declare bancrupcy, but not Barclays.

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stephen lyth

Feb 28, 2013 at 14:10

Barclays took money off a bent Arab and shafted a lot of people, normal banking procedures

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Reg

Mar 01, 2013 at 09:03

@ Man in Black - Barclays DID need bailing out...it was just that the Arabs did it in a far slicker manner than UK Gov. A nice smash and grab case and ' win win ' for both sides.

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Bigben

Mar 01, 2013 at 10:06

It is of course entirely the fault of regulators and the governement that the global banking crisis occurred ! It was in fact caused by a set of badly designed credit derivative products that thad anyone thought through a few scenarios would have been sen for the risk that they were. As opposed to focusing on which model of aston martin the profits would afford. Usual little britain attitude comments. How about corporate responsibility in a global market?

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