UPDATE 3-Barclays called reckless over $511 mln payments to Qatar investors

Mon Sep 16, 2013 11:43am EDT

* UK regulator plans to fine bank 50 mln stg for disclosure failings

* Barclays says it will fight FCA's Qatar deal findings

* Barclays income down 500 mln stg July-Aug on weak investment bank

By Steve Slater

LONDON, Sept 16 (Reuters) - Barclays has been branded reckless by a British watchdog for failing to disclose payments of 322 million pounds ($511 million) in advisory fees to Qatari investors who helped bail it out during the financial crisis.

In its prospectus for a 5.95 billion pound ($9.4 billion) share issue, the British bank said the Financial Conduct Authority (FCA) planned to fine it 50 million pounds for its failure to adequately disclose the fees that have been paid over the last five years.

The payments were made under "advisory service agreements" linked to Barclays' emergency fundraising with Qatari investors, which helped the bank avoid taking a taxpayer bailout in 2008.

"The FCA considers that Barclays ... acted recklessly," the prospectus said.

The FCA's findings are another blow to Barclays Chief Executive Antony Jenkins, who took over a year ago and continues to be dogged by issues from the past as he tries to clean up his bank after a string of scandals.

It was the first bank to be fined for its part in a global scam to manipulate Libor interest rates and has set aside 5.5 billion pounds to compensate customers for mis-sold insurance and interest rate hedging products.

Barclays said it was fighting the FCA's findings. The dispute could go to a tribunal, and take months to be finalised.

The watchdog, which declined further comment, issued warning notices to Barclays last week, including notification of the financial penalty.

The FCA and the UK Serious Fraud Office (SFO) have been investigating for about a year the circumstances surrounding Barclays' controversial fundraising from Qatar in 2008.

The U.S. Department of Justice and Securities and Exchanges Commission are also probing the bank's relationships with Qatar, and the U.S. Federal Reserve has asked to be kept informed, Barclays said.

Qatar Holding invested 5.3 billion pounds in the bank in two fundraisings, which helped it avoid the government bailouts of rivals Lloyds and Royal Bank of Scotland.

The deal raised hackles from the outset, with other shareholders angry that Middle East investors were offered lucrative terms.

Qatar has made over 1.5 billion pounds from its bet on Barclays, according to Reuters calculations, and is still the bank's biggest shareholder with a 6.3 percent stake. It was paid 128 million pounds in fees as part of the cash calls and agreed to provide advisory services to Barclays in the Middle East. Those services have been the subject of the investigations.

WEAK TRADING

Barclays' prospectus also said its income in July and August fell by 500 million pounds from a year ago as revenue in its investment bank was significantly below the previous year.

The weak trading was mainly in its fixed income, currencies and commodities division and left adjusted income for the eight months to the end of August down 5 percent on the year.

Daily income for its investment bank so far this month was ahead of July and August but below September 2012, it said.

Investors shrugged off the Qatar investigation and weak trading and said the rights issues should attract strong demand. Barclays shares were up 1.6 percent at 306.6 pence by 1450 GMT.

Barclays launched its rights issue of new stock to plug a 12.8 billion pound capital shortfall identified by Britain's regulator in July.

It is offering shareholders one new share at 185 pence for every four they own. The bank expects the new shares to start trading on Oct. 4.

Risk disclosures in the 185-page prospectus showed the bank is battling on several other fronts.

It said it could also lose C$500 million ($484 million) from a dispute in Canada related to the sale of credit default swaps. Barclays lost a court case against Devonshire Trust, an asset-backed commercial paper trust, two years ago and in July the Court of Appeal for Ontario dismissed its appeal. Barclays said it was considering its options.

The bank said it would continue to "vigorously" defend itself against a record $453 million fine imposed by a U.S. energy regulator in July. The fine imposed by the Federal Energy Regulatory Commission (FERC) relates to power trading in the western United States from 2006 to 2008.

Barclays said the criminal division of the United States Attorney's Office in the Southern District of New York was also now looking at the same conduct issues as FERC.

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