September 01, 2017

Barclays wins dismissal of U.S. class-action litigation


On September 13, Barclays PLC, a British multinational bank and financial services company, won the dismissal of U.S. class-action litigation by investors who bought its stock just months before the 2008 global financial crisis and accused it of concealing its exposure to risky debt and inability to manage credit risks.

In this regard, Judge Paul Austin Crotty, Senior US District Judge of the US District Court for the Southern District of New York, said, “Investors failed to show that Barclays and underwriters led by Citigroup Inc (C.N) deceived them when the British bank sold $2.5 billion of American depositary shares in April 2008.”

The judge then said, “Though the shares lost 80% of their value by the following March, much of that decline could have reflected fallout from the collapse of Lehman Brothers Holdings Inc, the bailout of U.S. insurer American International Group Inc, and government capital injections into other British banks. In such circumstances, the prospect that the plaintiff’s loss was caused by the alleged misrepresentations decreases.”

The judge concluded saying, “Barclays’ disclosures to investors about its capital strength and dealings with British financial regulators were sufficient, as were its disclosures about how further credit market ‘dislocations’ might hurt its finances. Given these disclosures, a reasonable investor would infer how continued credit market dislocation might reasonably be expected to have a material impact on future revenues, leaving Barclays vulnerable to additional write-downs.”

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