Barclays & Stanchart: Should you hold these stocks despite legal hit?

Highlights 

• Barclays is facing legal action over information regarding the relationships between Jes Staley, the company’s former chief executive officer (CEO), and Jeffrey Epstein, a convicted sex offender.
• Standard Chartered is undergoing legal proceedings after the investors’ alleged the bank of making misleading statements about breaches of US sanctions against Tehran and withholding confidential information.

Two of the UK’s leading lenders - Barclays and Standard Chartered have recently been subject to legal proceedings recently. Let us go through the details and explore if there is any impact on their investment prospects.

Barclays Plc (LON: BARC)

Barclays is facing legal action over information regarding the relationships between Jes Staley, the company’s former chief executive officer (CEO), and Jeffrey Epstein, a convicted sex offender. The prosecutors in the US courts are against the bank for all related correspondence between the two, including information from its own probe.

Jes Staley steps down as CEO

Earlier in the month, Barclays CEO Jes Staley stepped down from his position post a dispute with financial regulators in the UK, over how he described his association with Jeffrey Epstein.

Mr Staley was replaced as CEO by C.S. Venkatakrishnan. The decision was a part of the investigation conducted by the Prudential Regulatory Authority (PRA) and the Financial Conduct Authority (FCA) into Mr Staley’s characterisation of the nature of his association with Epstein, who committed suicide in prison in August 2019 while awaiting trial on sex trafficking charges.

The investigation, however, provided no information that Mr Staley witnessed or was aware of, Mr Epstein’s alleged crimes, which was the main question underpinning the bank’s support for Mr. Staley post-Epstein’s arrest in 2019.

In case the former CEO is found guilty of misleading regulators he could have to pay up a fine and face a ban from the UK’s financial industry or both.

Shareholders fuming over Staley’s exit package

Many of the top shareholders of Barclays have raised concerns regarding the terms of the ex-CEO Jes Staley’s exit and his abrupt resignation. According to a release by the bank on 1 November, the former CEO would continue to receive a £2.4 million salary, a pension allowance of £120,000 and other benefits until October 2022. The former CEO’s repatriation costs to the US are also eligible to be covered according to the bank’s statement.

Several shareholders have expressed their anger with the bank’s plans and lodged complaints to the Investor Forum. The new CEO prepares to meet investors later this month.

Standard Chartered Plc (LON: STAN)

Standard Chartered is undergoing legal proceedings after the investors’ alleged the bank for making misleading statements about breaches of US sanctions against Tehran and that it withheld information after the company paid a fine of £415 million in 2012. The penalty was paid based on the understanding that the bank's connection with individuals and firms in Iran ended in 2007. However, it later surfaced that Stanchart continued its dealings with companies in Iran.

Stanchart was further asked to pay up a fine of £900 million in April 2019 for breaching the US sanctions after an investigation revealed that it had been transacting with individuals and companies in Cuba, Iran, and Sudan. 

Fresh legal claims are based on allegations that investors purchased Standard Chartered shares at 'artificially inflated' prices, a result of false and misleading statements. Over a hundred trustees, investors and retirement funds in the UK and US have joined the class action filed at the High Court in September 2021. The shares of the bank peaked at above £17 in 2010 and were over £15 in 2012. They closed at £4.51 on 19 November 2021.