Barclays wants the High Court of London to reduce the value of the £560mn lawsuit filed by investors. This is done by excluding the claims made by passive funds regarding a fall in the share price of Barclays’s stock due to regulatory scrutiny over its “dark-pool” trading exchange.
Barclays is being sued by a number of investment funds who claim that the share price was artificially inflated due to “false statements” made by the lender about its dark-pool exchange, which allows private trades.
Barclays’ lawyers argued that the passive funds involved in the litigation could not claim to be misled by Barclays and therefore should not have the right to sue, as they hadn’t read the disclosures provided by the lender. The inclusion of market indexes in passive funds’ portfolios automatically triggers the purchase of shares.
Helen Davies KC representing the bank told the court the claimants case had “fundamental deficiencies”.
In written arguments, Jonathan Nash KC acted for the shareholders and stated that all investors, active or passive, “are entitled to” trade on the assumption that share prices include “all material information”.
The decision of the judge will determine whether index tracking funds are allowed to participate in lawsuits filed against UK companies for share price decreases.
In 2020, Barclays shareholders filed a suit in London against the bank. They claimed that the bank had made “false” or misleading statements to the markets.
This is just one of many lawsuits filed at the High Court in London against London-listed firms, including Glencore and Standard Chartered. Both companies are contesting these suits.
The bank has filed a lawsuit to contest the claim and is asking the court to dismiss the claims for 242 sub-funds and funds, which are worth approximately £330mn – more than half of the total £560mn that it faces.
Barclays is being sued by investors including passive funds managed Amundi and State Street. The lawsuit stems from losses suffered by shareholders a decade earlier.
On a single day, in 2014, Barclays lost about £2.5bn from its market capitalisation after US regulators filed a lawsuit against the bank. They accused the bank of favouring high-speed trader on its dark pool at the expense of institutional investors.
Eric Schneiderman, New York’s former attorney general, said at the time that Barclays’ dark pool had “a lot of predators” and was there “at Barclays’ invitation”.
Barclays paid $70mn in 2016 to the Securities Exchange Commission (SEC) and Schneiderman’s office in a settlement, in which they also admitted making materially false representations.
The majority of shareholder lawsuits settled before trial. This means that there are few precedents in England and Wales for several important issues, such as the status of passive investments funds, who have become major holders of UK stock.
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