Barclays Capital Inc has agreed to pay a fine of $150,000 as a part of a settlement with the Financial Industry Regulatory Authority (FINRA).

In July 2021, Barclays served as an underwriter for an initial public offering for Company A, which raised approximately $700 million. As stated in the offering documents, Company A used the offering proceeds to purchase LLC units from Company B; which in turn applied the proceeds from the sale of the LLC units to repay an outstanding debt.

A Barclays affiliate served as a lender to Company B and received approximately $150 million from Company B’s repayment primarily using the offering proceeds.

The use of approximately 20% of the offering proceeds to repay the firm’s affiliate was a conflict of interest that required Barclays to satisfy FINRA Rule 5121 (a)( 1) or (a)(2) if it was to participate in the offering.

Barclays did not satisfy FINRA Rule 5121 (a)(1) because the lead underwriter for the offering also had a conflict and the securities offered were not investment grade rated and did not have a bona fide public market at the time of the offering. Barclays did not satisfy FINRA Rule 5121 (a)(2) because a QIU did not participate in the preparation of the registration statement and prospectus.

Therefore, Barclays violated FINRA Rules 5121 and 2010.

On top of the $150,000 fine, Barclays has agreed to a censure.