1

FINAL NOTICE

To:
Barclays plc

ACTION

1.
For the reasons given in this Notice, the Authority hereby imposes on Barclays plc a

financial penalty of £30 million pursuant to section 91 of the Act.

SUMMARY OF REASONS

2.
Barclays plc is a global banking and financial services company headquartered in

London. It has securities admitted to premium listing on the Official List of the

Authority and admitted to trading on the Main Market of the London Stock

Exchange. It is also quoted on the New York Stock Exchange. At the end of June

2008, it had a market capitalisation of just over £19 billion. Barclays Bank plc

(“Barclays Bank”) is a UK retail bank with securities admitted to listing on the Official

List of the Authority and admitted to trading on the London Stock Exchange, and is

a subsidiary of Barclays plc. In this Notice, except where the Authority considers it

is necessary and/or helpful to specify the relevant entity, the term “Barclays” is used

to refer to Barclays plc and/or Barclays Bank.

3.
In June and October 2008, Barclays undertook two capital raisings pursuant to which

it intended to raise up to £4.5 billion and £7.3 billion respectively. The capital raisings

took place against the background of the global financial crisis, which increased

dramatically in severity during this period culminating in the collapse of Lehman

Brothers in September 2008 and the UK Government’s £37 billion injection of capital

into certain major UK banks in October 2008.

4.
In each of Barclays’ capital raisings, a small number of ‘anchor investors’ agreed to

participate, including the Qatar Investment Authority, via its investment arm Qatar

Holding LLC (“QH”), and a Qatari investment vehicle, Challenger Universal Limited

(“Challenger”) (together the “Qatari entities”). In each capital raising, the Qatari

entities agreed to participate for up to £2.3 billion, representing over 50% of the

total capital raised in June 2008 and over 31% of the capital raised in October 2008.

The anchor investors were paid certain fees and commissions in connection with their

participation in the capital raisings.

5.
At the same time as the capital raisings:

(1)
in June 2008, Barclays plc; and

(2)
in October 2008, Barclays Bank

entered into advisory agreements with QH (the “Agreements”).

6.
Pursuant to the Agreements, QH was to be paid fees amounting to a total of £322

million, of which £42 million was to be paid pursuant to the advisory agreement

entered into in June 2008 (the “June Agreement”) and £280 million was to be paid

pursuant to the advisory agreement entered into in October 2008 (the “October

Agreement”). In return, the June Agreement provided that QH was to provide various

services to Barclays over a period of three years in connection with the development

of Barclays’ business in the Middle East. The services to be provided by QH were not

specified or explained in the June Agreement, which stated that their type and scale

would be refined as the relationship developed. The October Agreement provided

that QH, possibly in association with Challenger, would provide various services in

addition to those provided under the June Agreement over a period of five years,

and listed six specific services that these would include. The Agreements formed part

of the basis on which the Qatari entities agreed to participate in the capital raisings.

7.
In its announcement and prospectus associated with the June capital raising,

Barclays plc disclosed the existence of the June Agreement. In the prospectus,

Barclays plc also disclosed the commission that the Qatari entities and the other

anchor investors would receive in consideration for their participation in the June

capital raising. Barclays plc did not disclose the fees to be paid to QH under the June

Agreement, nor their connection to the Qatari entities’ participation in the June

capital raising.

8.
The announcement by Barclays plc and, between them, the three prospectuses

associated with the October capital raising (one of which was published by Barclays

plc, with the other two published by Barclays Bank), and Barclays plc’s circular to

shareholders seeking approval of that capital raising, disclosed the commissions that

the Qatari entities and the other anchor investor would receive in consideration for

their participation in the October capital raising. They also disclosed that QH would

receive an arrangement fee. The existence of the October Agreement was not

disclosed in the announcement, the prospectuses or the circular. Thus, Barclays did

not disclose the fees to be paid under the October Agreement or their connection to

the Qatari entities’ participation in the October capital raising.

9.
The disclosure of the fees to be paid under the Agreements and their connection to

the Qatari entities’ participation in the capital raisings would have had a material

impact on the terms of the capital raisings as disclosed. The disclosure of the fees

under the Agreements as payments associated with the capital raisings would have:

(1)
more than doubled the disclosed level of payments due to the Qatari entities

in connection with their participation in the June capital raising; and

(2)
more than tripled the disclosed level of payments due to the Qatari entities in

connection with their participation in the October capital raising.

This would have been highly relevant information to shareholders, investors and the

wider market, especially in October 2008 when Barclays’ capital raising required

approval by shareholders, the disclosed costs were already perceived to be very

expensive and there was financing available from the UK Government.

10.
Accordingly, Barclays’ failure to mention these matters in the announcements and

prospectuses associated with the capital raisings rendered the information in them

misleading, false and/or deceptive and meant that it omitted matters likely to affect

its import. Barclays plc’s failure to mention these matters in the circular that it sent

to its shareholders in connection with the October capital raising meant that it did

not contain all information necessary to allow its shareholders to make a properly

informed decision as to the voting action required of them, in breach of LR

13.3.1R(3).

11.
Barclays plc failed to take reasonable care to ensure that the information contained

in the announcements and prospectuses associated with the capital raisings that it

published was not misleading, false or deceptive and did not omit anything likely to

affect its import, in breach of LR 1.3.3R.

12.
Barclays received legal advice that it did not need to disclose any further information

regarding the June Agreement, and that it did not need to disclose any information

in respect of the October Agreement, providing that it was satisfied that the value it

could expect to receive from the June Agreement and the October Agreement

respectively fully justified the fees to be paid to QH thereunder. However,

notwithstanding this advice, Barclays plc failed to take reasonable care to comply

with its obligations under LR 1.3.3R because:

(1)
In respect of both of the Agreements, Barclays plc did not consider its

obligations under LR 1.3.3R, or seek, or obtain, specific legal advice regarding

those obligations.

(2)
When advising on disclosure, in respect of both of the Agreements, Barclays’

external lawyers were not fully informed, and Barclays plc did not take

reasonable care to ensure they were fully informed, of the connection between

the Agreement and the capital raising. In particular, they were not aware, in

respect of each Agreement, that the genesis of the Agreement was QH’s

requirement for additional fees for participating in the capital raising, that the

Qatari entities would not participate in the capital raising if QH did not receive

these additional fees, and that the Agreement was connected to the capital

raising and was not a separate commercial transaction, and they were not

aware that the fees payable to QH were calculated by reference to the Qatari

entities’ maximum commitment in the June capital raising (under the June

Agreement) and by reference to the value required by QH (under the October

(3)
In respect of both of the Agreements, Barclays plc did not take reasonable care

to ensure that the value Barclays could expect to receive from services

pursuant to the Agreement fully justified the fees to be paid to QH thereunder:

(a)
No reasonable attempt was made by Barclays plc to assess the value of

the opportunities that the Agreements offered before they were entered

into. In respect of the June Agreement, the only attempt at assessment

was an informal exercise undertaken by a Barclays senior manager before

the terms of the Agreement were known. In respect of the October

Agreement, a Barclays senior manager made a rapid and informal

judgement, which they later described to the Authority as a “commercial

bet”. In respect of both Agreements, there was no systematic

assessment, no documented assessment and no coherent effort at

valuation. There was also no assessment before each Agreement was

entered into of the value the Agreement added over and above the

opportunities Barclays would in any event have had in the Middle East,

and any additional benefit that would have flowed from the Qatari entities’

participation in the capital raising. Further, in respect of the October

Agreement there was no assessment of the value the Agreement added

in excess of Barclays’ existing opportunities under the June Agreement.

In addition, in respect of both Agreements, there was no assessment of

the gross income, related costs and hence net profit that needed to be

generated to justify the fees.

(b)
The fees were calculated by reference to what QH required (which, in

respect of the June Agreement, was an additional 1.75% of its maximum

commitment plus interest, and in respect of the October Agreement, was

financially equivalent to QH having invested in both the June and October

capital raisings at 130p per share) in return for its investment in the

capital raisings, rather than by reference to an assessment of the value

of the services that the Qatari entities could provide. No assessment of

the value was undertaken when QH asked for a significant increase in the

fees due, in respect of the June Agreement, to Challenger’s participation

in the capital raising, or, in respect of the October Agreement, to adverse

movements in Barclays plc’s share price and warrant valuations.

(4)
Neither the Board of Barclays plc nor the Board Finance Committee, which was

given authority by the Board to take decisions on behalf of the Board in relation

to the capital raisings, was fully informed of all relevant facts regarding the

Agreements. In particular, they were not aware of the connection between the

June Agreement and the June capital raising, and, although the Board’s

approval was required for the £280 million fee payable to QH under the October

Agreement, neither the Board nor the Board Finance Committee was made

aware of the £280 million fee or how it was calculated. They were also not

informed of how Barclays senior managers had satisfied themselves that

Barclays could receive value at least equal to the fees payable under the

Agreements.

13.
The Authority considers that, in respect of its failure to disclose the fees to be paid

to QH under the October Agreement and their connection to the October capital

raising, Barclays plc did not act with integrity towards its actual and potential

shareholders, in breach of Listing Principle 3, as follows.

14.
The Authority considers that Barclays plc, including a senior manager (whose state

of mind the Authority attributes to Barclays plc in the circumstances), acted

recklessly, in unreasonably approving the announcement, the prospectus that it

published and the circular associated with the October capital raising, in

circumstances where Barclays plc must have been aware that it had not taken

reasonable care to ensure that the value Barclays expected to receive from services

pursuant to the October Agreement fully justified the fees that Barclays was required

to pay to QH under it, amounting to £280 million over five years, and was therefore

aware of the clear risk that:

(1)
the omission of any reference to the October Agreement, the fees to be paid

to QH under the October Agreement and their connection to the October capital

raising from the announcement and the prospectus published by Barclays plc

associated with the October capital raising rendered the information contained

in those documents misleading, false and/or deceptive and meant that it

omitted matters likely to affect the import of that information; and

(2)
the omission of those matters from the circular sent by Barclays plc to its

shareholders in connection with the October capital raising meant that it did

not contain all information necessary to allow its shareholders to make a

properly informed decision as to the voting action required of them.

7


15.
The Authority therefore has decided to impose a financial penalty on Barclays plc in

the amount of £30 million pursuant to section 91 of the Act for breaching LR 1.3.3R,

LR 13.3.1R(3) and Listing Principle 3.

16.
This Notice is further to the Decision Notice issued by the Authority to Barclays plc

on 23 September 2022. Barclays plc referred the matter to the Upper Tribunal (Tax

and Chancery Chamber) (“the Tribunal”) on 19 October 2022 but, following

settlement discussions with the FCA, notified the Tribunal of the withdrawal of the

reference on 22 November 2024. The Tribunal gave its consent to this withdrawal

on 22 November 2024.

DEFINITIONS

17.
The definitions below are used in this Notice:

“the Act” means the Financial Services and Markets Act 2000

“Agreements” means the June Agreement and the October Agreement

“the Authority” means the body corporate previously known as the Financial Services

Authority and renamed on 1 April 2013 as the Financial Conduct Authority

“Barclays” means Barclays plc and/or Barclays Bank

“Barclays Bank” means Barclays Bank plc

“Board” means the board of directors of Barclays plc

“capital raisings” means the June capital raising and the October capital raising

“CDB” means China Development Bank, a financial institution in the People’s

Republic of China which provides funding for national projects and facilitates China’s

cross-border investment and global business co-operation

“Challenger” means Challenger Universal Limited, a Qatari investment vehicle

“Conditional Placees” has the meaning set out at paragraph 18 of this Notice

“DEPP” means the Decision Procedure and Penalties Manual, part of the Handbook

“Handbook” means the Authority’s Handbook of Rules and Guidance

“HBOS” means Halifax Bank of Scotland

“June Agreement” means the advisory agreement entered into by Barclays plc and

QH in June 2008

“June capital raising” means the capital raising undertaken by Barclays in June 2008

“MCN” means Mandatorily Convertible Note

“MOU” means Memorandum of Understanding

“October Agreement” means the advisory agreement entered into by Barclays Bank

and QH in October 2008

“October capital raising” means the capital raising undertaken by Barclays in October

“PCP” means PCP Capital Partners LLP

“Project Tinbac” means the potential oil price hedging transaction discussed by

Barclays and the Qatari entities in October 2008

“Qatari entities” means QH and Challenger

“QC” means Queen’s Counsel

“QH” means Qatar Holding LLC, the investment arm of Qatar Investment Authority

“RBS” means Royal Bank of Scotland

“RCI” means Reserve Capital Instrument

“RDC” means the Regulatory Decisions Committee of the Authority (see further

under Procedural Matters below)

“Senior Manager A” means an individual who was a senior manager and a director

at Barclays plc and Barclays Bank

“SFO” means the Serious Fraud Office

“SPV” means special purpose vehicle

“the Tribunal” means the Upper Tribunal (Tax and Chancery Chamber)

“the Warning Notice” means the warning notice given to Barclays plc dated 13

FACTS AND MATTERS

Initial stages of the June capital raising

18.
Barclays’ capital raising in June 2008 took place against the backdrop of the financial

crisis that had engulfed the global financial system from August 2007 onwards. RBS

and HBOS had announced large rights issues in April 2008. It was generally expected

that Barclays would also need to raise capital in order to improve its Core Tier 1

capital ratio, a key measure of a bank’s financial strength.

19.
In mid-May 2008, Barclays proposed to raise between £3 billion and £4.5 billion in

capital. The proposed structure of the capital raising would involve a significant

proportion of shares being placed at a discount with certain anchor investors on a

conditional basis (the “Conditional Placees”), subject to giving existing shareholders

the right to “claw back” those shares via an open offer. This meant that the

Conditional Placees would effectively underwrite the capital raising since they would

be committed to subscribe for all shares not taken up by existing shareholders in the

open offer.

20.
It was determined by Barclays that the Conditional Placees would be paid a

commission of 1.5% of their potential maximum subscription in return for this

commitment.

21.
From mid-May 2008 onwards, Barclays engaged in discussions with a number of

potential anchor investors. One such investor was QH, with whom Barclays had a

pre-existing relationship.

Early negotiations with QH

22.
On 23 May 2008, senior representatives of Barclays met with representatives of QH

to discuss the proposed capital raising. At the meeting, Barclays expressed its desire

that QH’s participation in the capital raising would lead to a strategic partnership as

well as a financial one. This reflected Barclays’ preferred approach of entering into

strategic partnerships with anchor investors alongside their investments in Barclays

in the form of MOUs or similar agreements, as it had done with CDB in July 2007.

23.
Subsequent negotiations with QH over the next few days focussed almost exclusively

on the capital raising and proceeded more slowly than anticipated, with QH

negotiating harder than Barclays had expected.

24.
Barclays plc’s Board was updated as to the progress of the capital raising on 28 May

2008. It was reported that the amount of capital expected to be raised had increased

to between £4 and 5 billion, with QH being one of the largest proposed investors,

and that the commission to be paid to the Conditional Placees was 1.5%.

25.
In advance of the Board meeting, the Board members were provided with a

“Memorandum on Directors’ Responsibilities and Liabilities for public documents” by

Barclays’ external lawyers dated 22 May 2008, which included a reference to the

requirement for Barclays plc’s directors to ensure that the prospectus “must not omit

any information or contain information which is incorrect or misleading”. On 28 May

2008, the Board members signed Director Responsibility Letters confirming, amongst

other things, their responsibility for the prospectus.

QH’s payment requirements and the June Agreement

26.
On 3 June 2008, a meeting took place between senior representatives of Barclays

and QH. In the meeting, QH required a fee of 3.75% for its participation in the

capital raising. According to a Barclays senior manager, when this was reported to

Senior Manager A after the meeting, they commented that they “could live with 3.5

if [they] had to”.

27.
Following the meeting, and in light of QH’s requirement for a fee of 3.75%, Barclays

conducted an analysis of different commission levels above 3% in connection with

QH’s potential investment of £2 billion. When discussing the additional fees required

by QH with another Barclays senior manager, a Barclays senior manager made clear

that the fees would not be given to other investors and would “have to be on the

side”.

28.
On 9 June 2008, a Barclays senior internal lawyer emailed members of Barclays’

senior management, copied to Barclays’ external lawyers, and explained that another

Conditional Placee was “in full neurosis regarding parity of treatment” and required

comfort that “no firm or conditional place has any fee, commission etc not recorded

in its subscription agreement”.

29.
By no later than 11 June 2008, after exploring whether a different mechanism could

be used so that QH received the additional value it had required, Barclays identified

an advisory agreement as a mechanism by which this could be achieved. The

proposed use of an advisory agreement for this purpose was considered and

approved by Barclays senior managers.

30.
Around this time, a conference call took place between two Barclays senior managers

and a Barclays senior internal lawyer, the outcome of which was that it was agreed

that Barclays could enter into an advisory agreement to meet QH’s requirement for

fees in excess of 3%, provided that Barclays “could get full value for services”. One

of the Barclays senior managers informed the Authority in interview that

subsequently the other Barclays senior manager, having talked to them and a

“number of the product chiefs at Barclays Capital”, was satisfied that Barclays could

get full value for services.

31.
In the afternoon of 11 June 2008, during telephone calls between two Barclays senior

managers, concerns were expressed about entering into an advisory agreement in

circumstances where the subscription agreements associated with the capital raising

expressly provided that Barclays had not entered into any other agreements with, or

paid additional fees to, QH in connection with the capital raising, and whether it

might be said that a payment to QH under the advisory agreement was “just a fee

in the back door”. They also discussed the extent to which disclosure of the existence

of the advisory agreement as “just another MOU” would ensure that Barclays was

“completely protected”, without the need to disclose the fees payable under it.

32.
Also on 11 June 2008, Barclays plc’s Board was updated as to progress in the capital

raising. The minutes of the meeting and a Board presentation referred extensively

to the prospect of MOUs with certain anchor investors, pursuant to which no fees

would be paid. There was no mention of a MOU or advisory agreement with QH,

which was described only as a new potential investor.

33.
On 13 June 2008, QH requested Barclays’ guidance as to “the best way to deal with

the additional fees”. This was a reference to QH’s requirement for fees in excess of

3%, about which QH was still awaiting Barclays’ substantive response.

34.
In telephone calls on that day, members of Barclays senior management discussed

the need for the capital raising to be “disassociated” from the proposed mechanism

by which QH’s additional payment requirement would be met. This would be achieved

by reference to Barclays’ assessment of the commercial value of the proposed

arrangement that would in due course become the June Agreement.

35.
Also on 13 June 2008, a Barclays senior manager sent a memorandum to other

Barclays senior managers and two Barclays senior internal lawyers. According to the

Barclays senior internal lawyers in interview, the memorandum recorded the

Barclays senior manager’s discussions with QH, pursuant to which they understood

that QH had accepted a commission of 1.5% for the capital raising and that QH’s

requirement for additional fees would be met by means of the advisory agreement.

36.
Later that day, a Barclays senior internal lawyer sent an email to members of

Barclays senior management and another Barclays senior internal lawyer setting out

the type of disclosure wording that would need to be put in the prospectus for the

June capital raising in respect of the advisory agreement. The proposed wording

referred to the existence of the advisory agreement, but not the amount of fees

payable under it. The email stated that this wording reflected “The acceptance by

[QH] that the placing commission is 1.5% only and that additional value must be

provided for any additional payment”, that “The advisory services agreement will be

for 36 months at a fee of £1m per month payable in advance” and that “[QH] will

deliver value for money by providing introductions, connections, local cultural advice

etc to facilitate expansion of our business in the [Middle East]. We believe real and

valuable opportunities will arise as a result. There will also be secondments and

other items which may deliver more direct value back to us as well.”

37.
The Barclays senior internal lawyer said in the email that they had discussed the

disclosure with Barclays’ external lawyers, who were content with it in the

circumstances described above. Barclays’ external lawyers, however, had not been

fully informed of the connection between the advisory agreement and the capital

raising. In particular, they had not been made aware that the genesis of the advisory

agreement was QH’s requirement for additional fees for participating in the capital

raising, that the Qatari entities would not participate in the capital raising if QH did

not receive these additional fees, and that the agreement was connected to the

capital raising and was not a separate commercial transaction.

38.
At a meeting between a Barclays senior manager and QH the next day (14 June

2008), the prospect of Challenger also participating in the capital raising was

discussed. Contemporaneous notes of the meeting recorded Barclays’ intention that

“extra fees” would be paid for Challenger’s participation by means of the “same

mechanism” (i.e. an advisory agreement).

39.
On 16 June 2008, an email sent on behalf of the Qatari entities to Barclays’ external

lawyers recorded their understanding that they would be paid “an additional fee of

1.75% of [their] maximum commitment” in the capital raising (a figure amounting

to just over £40 million). This fee was in addition to the 1.5% commission that

Barclays was paying to anchor investors. Although they received this email, Barclays’

external lawyers did not understand that this was a reference to the fee to be paid

to QH in respect of the advisory agreement and did not realise that the fee payable

to QH under the advisory agreement was calculated by reference to the Qatari

entities’ maximum commitment in the capital raising. Barclays’ external lawyers

forwarded the email to Barclays, including to a Barclays senior internal lawyer who

commented to two Barclays senior managers “The fee is fixed at 1.5% as for the

other investors. Any additional payment must be in exchange for additional value

delivered and be independently justifiable”. A further email to Barclays sent on behalf

of the Qatari entities on the following day referred to the “Fees arrangement as

agreed”.

40.
Concerns were expressed in a telephone call between two Barclays senior managers

on 18 June 2008 that the calculation of the advisory fees as described above would

“look like 3.25%”, which reflected the risk that they could be seen as payments to

the Qatari entities for their participation in the capital raising.

Negotiation of the June Agreement

41.
On 16 June 2008, a Barclays senior internal lawyer circulated a draft of the June

Agreement internally within Barclays, copied to Barclays’ external lawyers. They

noted in their covering email that the draft was longer than originally contemplated

in part because “we need demonstrably to be getting our money’s worth otherwise

there is a risk that the fees could be perceived as a disguised commission”. The draft

was subsequently amended following internal discussions, amongst other things, to

shorten it and put it into letter form. Further discussions took place during 17 June

2008 around the proposed payment terms. The Qatari entities had initially wanted

immediate payment of the fees, but had accepted payment over 12 months on the

basis that they would also receive interest. This was agreed by a Barclays senior

manager, with the period of the services remaining at 36 months.

42.
A Barclays senior internal lawyer summarised the outcome of these discussions in

an email sent that afternoon to, amongst others, two Barclays senior managers,

copied to Barclays’ external lawyers. The Barclays senior internal lawyer confirmed

that the other details remained as set out in their email of 13 June 2008 (see

paragraph 35 above) and that Barclays’ external lawyers agreed that the June

Agreement was not a material contract requiring disclosure. However, as mentioned

in paragraph 36 above, Barclays’ external lawyers had not been fully informed of the

connection between the advisory agreement and the capital raising.

43.
A draft of the June Agreement was sent by a Barclays senior manager to QH on 17

June 2008. The draft provided for certain services (albeit drafted in general terms)

to be provided by QH over a period of three years in return for which Barclays would

pay £36 million, payable in four equal quarterly instalments during the first 12

months of the agreement.

44.
Further draft agreements were exchanged over the following two days (18 June and

19 June 2008). The main proposed changes related to the scope of services to be

provided (which the lawyers for QH sought to reduce significantly) and an increase

in the proposed fee to £47.5 million plus interest. A termination provision was also

inserted requiring the balance of any outstanding fees under the agreement to

become payable if Barclays terminated the agreement without valid cause.

45.
A Barclays senior internal lawyer circulated an email to two Barclays senior managers

on 18 June 2008 regarding the changes being discussed. They explained that the

increase in the proposed fee from £36 million to around £47 million was prompted

by the need to pay additional fees to Challenger, as a result of Challenger’s proposed

participation in the capital raising, and had been discussed with Barclays’ external

lawyers. The Barclays senior internal lawyer explained that, in order to justify this

increase in the fee, the scope of the services needed to be increased. They concluded

“We must reiterate that the agreement needs to have real substance not only in its

words – our board needs to be satisfied that the services will justify the fees – but

also in its implementation. [QH] must genuinely be prepared to provide valuable

services to us for 36 months.” The following day the Barclays senior internal lawyer

sent an email to the lawyers for QH which stated, “Our prospectus will refer only to

the attached agreement for advisory services, and will not disclose the fees, nor

summarise the attached as a material contract.” The lawyer forwarded the email,

and the attached draft of the June Agreement, to Barclays’ external lawyers, among

others.

46.
On 19 June 2008, there was a meeting of Barclays plc’s Board Finance Committee,

at which the draft of the June Agreement referred to above was considered and

approved. The Board Finance Committee was a sub-committee of the Board and on

28 May 2008 the Board had delegated authority to it to deal with all matters relating

to the capital raising. Also on 19 June 2008, there was a board meeting of Barclays

Bank at which the same draft of the June Agreement was also considered and

approved. Minutes of both meetings noted that under the June Agreement, QH

“would provide advisory services to [Barclays] with a view to developing [Barclays’]

business in the Middle East and [Barclays] would pay to [QH] certain agreed fees in

respect of value received under these arrangements”. The minutes of the Barclays

Bank board meeting also noted that the June Agreement was “to be entered into in

conjunction with a subscription agreement between Barclays plc and [QH] pursuant

to the Placing and open Offer.”

47.
At a meeting on 23 June 2008, Barclays plc’s Board was informed that two major

anchor investors’ participation in the capital raising had significantly reduced. This

significantly increased the importance of the Qatari entities’ participation in the

capital raising. Neither at the meetings on 19 and 23 June 2008, nor at any other

time, were either Barclays plc’s Board, its Board Finance Committee or the board of

Barclays Bank fully informed of the connection between the June Agreement and the

June capital raising. In particular, they were not informed that an additional 1.75%

fee had been agreed with QH or that the June Agreement was the means by which

it would be paid. They were also not informed of how Barclays senior managers had

satisfied themselves that Barclays could receive value at least equal to the fees

payable under the June Agreement.

48.
Further drafts of the June Agreement were exchanged on 22 and 23 June 2008.

These drafts were less detailed than previous drafts because QH did not wish “to

take on detailed obligations which it could later be argued by Barclays that [QH] had

breached”. In one draft of the agreement produced by QH, the proposed fee of £47.5

million was replaced by a reference to “[(1.75% x X) plus LIBOR]”.

49.
In the evening of 23 June 2008, having received the latest draft of the June

Agreement, a Barclays external lawyer sent an email to colleagues in which he

stated: “I do not like the lack of detail in this agreement which is now an agreement

to agree re services, yet contains detailed payment provisions. I have discussed

with the client that this could expose them to suggestions that it represents disguised

commission re the placing, but am assured that the services which are being agreed

are genuine and valuable and the payments being made are justified by the benefits

to be received. [Barclays’ internal lawyers] have received firm assurances on this

from the BarCap negotiators, as they have emphasised the need for this to be

appropriate remuneration for relevant services.”

50.
On 24 June 2008, Barclays calculated the fees payable under the June Agreement

by reference to 1.75% of the maximum potential amount of the Qatari entities’

participation in the capital raising, plus interest from the effective date of the June

Agreement on the basis that the Qatari entities would not receive these fees

immediately. This resulted in a figure of £41,685,000, which was rounded up to £42

million.

The June Agreement as signed

51.
The June Agreement was signed by Senior Manager A on behalf of Barclays plc on

25 June 2008. It comprised a one-page letter from Barclays plc to QH, which

provided that QH would provide Barclays with “various services … in connection with

the development of [Barclays’] business in the Middle East” for three years, in return

for payment of £42 million in four equal instalments during the first nine months of

the agreement. The figure of £42 million was written in manuscript. The services to

be provided by QH were not further specified or explained in the letter, which stated

that the “type and scale of services” would be refined as the relationship developed.

52.
In the early hours of 25 June 2008, the Qatari entities agreed to exchange the

subscription letters in return for receipt of the signed June Agreement.

Disclosure of the June capital raising and June Agreement

53.
On 25 June 2008, Barclays plc announced the capital raising and published an

associated prospectus. The prospectus disclosed that the Qatari entities and the

other anchor investors would receive a commission of 1.5% in consideration for their

participation in the capital raising. The announcement and prospectus referred to

the June Agreement, stating “Barclays is also pleased to have entered into an

agreement for the provision of advisory services by Qatar Investment Authority to

Barclays in the Middle East”, but did not disclose the fees paid under it, nor their

connection to the Qatari entities’ participation in the capital raising. The prospectus

noted that the directors and Barclays plc accepted responsibility for the information

contained therein and confirmed that, to the best of their knowledge, having taken

all reasonable care to ensure that such was the case, such information was in

accordance with the facts and did not “omit anything likely to affect the import of

such information”.

Events between July and September 2008

54.
After the June capital raising, there were no discussions between Barclays and QH

regarding the “type and scale” of services to be provided under the June Agreement.

More generally, the existence of the June Agreement was largely ignored in Barclays’

subsequent efforts to develop its business with QH, in Qatar or in the Middle East

generally. For example, no plan for actions under the June Agreement was

developed, and the existence of the June Agreement was ignored in various Barclays

presentations relating to its business in Qatar and the Middle East.

55.
In August 2008, QH sought payment of the first instalment of fees payable under

the June Agreement, which had not been paid on time. There was uncertainty within

Barclays as to the process by which the fees should be paid and the cost of them

accounted for, and to which services the fees related. It was ultimately decided that

the fees should be charged to Barclays Group, not to the business divisions within

Barclays plc which were supposed to be the beneficiaries of services under the June

Agreement. It was also Barclays Group that had covered the costs associated with

the June capital raising. In the Authority’s view, the fact that the fees payable under

the June Agreement were ultimately borne by Barclays Group, along with the

accounting treatment applied, is indicative that they were considered to be a cost

incurred in connection with the June capital raising.

56.
Shortly after the capital raising was announced on 25 June 2008, a Barclays senior

internal lawyer highlighted to two Barclays senior managers the need to keep a

record of services provided and value received. From September 2008 onwards,

Barclays began to log by email the services purportedly being provided under the

June Agreement. The emails only referred generically to periodic and ad hoc

communications with individuals at QH and their broad subject matter, without

regard to whether or not they arose from or in connection with the June Agreement.

Background to the October capital raising

57.
The global financial crisis had severely deepened by early October 2008, with

Lehman Brothers announcing its bankruptcy and the US Government rescue of AIG

in mid-September 2008.

58.
On 22 September 2008, Barclays plc announced that it had acquired Lehman

Brothers’ North American investment banking and capital markets business. At

around this time, Barclays contemplated obtaining further investment from the

Qatari entities in support of this acquisition. It appears that Barclays offered the

Qatari entities a fee of USD 39 million to obtain this further investment, which led to

Barclays considering how they could justify paying this fee.

59.
The possibility of using another advisory agreement was initially seen as

unattractive. A Barclays senior manager expressed concern that “it may raise

questions about what they actually got last time round [in the June capital raising]”,

whilst a Barclays senior internal lawyer stated, “we can’t use a similar advisory

arrangement because after all, how much advice do we need?”.

60.
Despite these concerns, an extension to the June Agreement was proposed in early

October 2008 in order to meet the Qatari entities’ fee requirements. On 6 October

2008, a Barclays senior manager was sent an email which set out the “benefits of

the advisory agreement to date”. These benefits comprised providing assistance

with Barclays’ application to open a branch in Doha, an introduction to Qatar Telecom

in connection with a potential transaction, discussions about a possible role on a

transaction involving a UK listed company and help with Barclays’ strategic thinking

around expanding its franchise in the Middle East.

61.
On 7 October 2008, a Barclays senior internal lawyer sent a copy of the draft

extension to the June Agreement to Barclays’ external lawyers. Barclays’ external

lawyers advised the Barclays senior internal lawyer that it would be “defensible” not

to disclose the extension on the basis that (amongst other things) “There is, we are

informed, (a) demonstrable fair value from the first tranche of services and (b) good

reason to believe that there will be demonstrable fair value to be had from the

additional services”. In an email summarising this advice, the Barclays senior

internal lawyer informed other Barclays senior internal lawyers that “The above is

subject to the rider that, were the original and proposed supplemental agreements

to cease to be held in confidence, we may be called upon to justify and explain the

agreements, including their proximity to the July and proposed new [QH]

subscriptions including the issue price discount relative to market value in each case.

It would assist us then to have evidence of the value of services both contemplated

at the outset and received.”

62.
A Barclays senior internal lawyer confirmed they would speak with a Barclays senior

manager about the “relevant evidence”. Subsequently, the proposed subscription

relating to the Lehman Brothers’ acquisition did not take place and the concept of an

extension to the June Agreement was not considered again until later that month, in

the context of the October capital raising.

63.
On 8 October 2008, the UK Government announced measures “to ensure the stability

of the financial system and to protect ordinary savers, depositors, businesses and

borrowers”. This included a requirement for UK banks, including Barclays, to increase

their capital position by £25 billion. The Government would make available £25 billion

for drawing as preference share capital and an additional £25 billion as preference

or equity capital if required. At a Board meeting that day, the Board expressed “a

clear preference … not to accept the offer of government capital”, noting that “there

would inevitably be constraints placed on the bank relating to dividends, operational

flexibility and executive compensation”.

64.
On 9 and 10 October 2008, global stock markets fell sharply. The Japanese, American

and UK markets all closed down approximately 20% on the week. Barclays plc’s

shares fell by 44%.

65.
On 13 October 2008, the UK Government announced that it was injecting £37 billion

of capital into certain major UK banks (not including Barclays).

66.
On the same day, Barclays plc announced that it was “well capitalised, profitable and

had access to the liquidity required to support its business”. However, it also referred

to a “need to maximise capital resources in the current economic climate” and stated

that “taking into account the new higher capital targets which [the Authority] has

set for all UK banks” Barclays expected to raise £6.5 billion “without calling on …

Government funding”. It was envisaged that this would be achieved via a mixture of

preference shares and equity.

Early discussions with the Qatari entities

67.
A Barclays senior manager met with representatives of the Qatari entities on 12

October 2008 to discuss their participation in the October capital raising. Those

representatives expressed interest in a structure involving the issue of preference

shares and warrants.

68.
There was a further meeting over dinner between Barclays senior managers

(including Senior Manager A) and representatives of the Qatari entities on 21 October

2008. Those representatives confirmed their interest in investing £2 billion in

Barclays and introducing certain other investors. It was clear to the Barclays senior

managers that the Qatari entities would be very demanding on “economics” (i.e. the

financial terms for investing), with the value of their investment in Barclays having

reduced significantly since the June capital raising, but they were generally

supportive of Barclays’ strategic development. There was also discussion around

appointing Barclays to manage a large oil price hedging contract, known within

Barclays as Project Tinbac, which Senior Manager A commented “offers lots of upside

to us”.

69.
The proposed structure of the capital raising at this stage involved the issue by

Barclays Bank of Reserve Capital Instruments and in due course Mandatorily

Convertible Notes. The RCIs were securities that provided for payment of annual

coupons and were redeemable at the option of Barclays Bank after a specified date.

The MCNs would operate for nine months as a bond with a coupon payable, and then

mandatorily convert to equity shares at a pre-agreed discount at the end of that

period. The capital raising subsequently included for nominal consideration warrants

exercisable at any time for a five-year period (to be issued by Barclays plc) in

association with the issue of RCIs.

70.
On 22 October 2008, Barclays plc’s Board Finance Committee, which the previous

day had been given authority by Barclays plc’s Board to take decisions on behalf of

the Board in relation to the capital raising, received an update from Senior Manager

A on the progress of the October capital raising. The minutes recorded that the Qatari

entities would be seeking significant fees, expected to be £325 million. (Manuscript

notes of the meeting recorded that the Qatari entities had firmly rejected Barclays’

proposal of £120 million and were seeking £600 million.) One Board Finance

Committee member is recorded as stating that fees in excess of £325 million would

be “hard to justify”. Project Tinbac was also discussed, with it being said that it

might contribute USD 250 million to Barclays.

71.
On the same day (22 October 2008), two Barclays senior managers were informed

by the Qatari entities of their financial requirements in order to participate in the

October capital raising. The Qatari entities would have to be provided with sufficient

“value” in the October capital raising that it would be financially equivalent to them

having invested in both the June and October capital raisings at 130p per share. This

represented a very significant challenge given that the Qatari entities had subscribed

for shares at 282p per share in June 2008, and Barclays plc’s share price on 22

October 2008 was 224.5p.

72.
The Barclays senior managers calculated that, in order to meet this requirement, the

October capital raising would have to provide economic value to the Qatari entities

equivalent to £600 million or more. This was broadly consistent with the amount that

the Qatari entities had, on the previous day, stated that they were seeking.

73.
The Barclays senior managers analysed ways of providing additional value to the

Qatari entities within the structure of the capital raising. They concluded that it would

be impossible to provide sufficient value to the Qatari entities in the capital raising

to meet their requirements, even on improved terms (see below). Meeting the Qatari

entities’ requirements would draw unfavourable comparisons with the cost of capital

available from the UK Government and was considered likely to be unacceptable to

Barclays’ existing shareholders. This left a significant “value gap” of about £200

million between what the Qatari entities were seeking and what Barclays could offer

within the confines of the capital raising. The October Agreement subsequently

became the mechanism by which Barclays bridged this value gap.

74.
On 23 October 2008, the Qatari entities temporarily pulled out of the October capital

raising. This jeopardised the entire capital raising. In response, Barclays improved

the terms of the capital raising, including offering warrants for nominal consideration

with the RCIs.

75.
The improved capital raising terms did not resolve the issue of the value gap. From

24 October 2008, Barclays began to include an advisory fee payable to QH as part

of its calculations of the cost of the October capital raising.

Legal advice obtained in relation to the October capital raising

76.
On 24 October 2008, Barclays’ external lawyers instructed a Queen’s Counsel to

advise on various issues relating to, amongst other things, financial assistance, the

payment of commissions and possible shareholder challenges arising from the

proposed capital raising. The Instructions to Counsel made reference to a “co-

operation agreement” with the Qatari entities, pursuant to which the parties would

agree to further their mutual business interests in a particular region, and asked the

QC to advise on whether it would be irrelevant for the purposes of unlawful assistance

or commissions, provided that it was on normal commercial arm’s length terms and

provided a bona fide corporate benefit to Barclays. The Instructions to Counsel did

not refer to any fees payable under the agreement or request advice on any

disclosure issues associated with it.

77.
The QC provided their advice the same day. They did not specifically advise on the

issue of disclosure of the “co-operation agreement”, but emphasised the “need for

full disclosure” generally to minimise the risk of successful shareholder challenge,

adding that “The financial terms of the capital raising arrangements, and in particular

fees payable to investors, would need to be fully transparent”.

78.
Following receipt of the QC’s advice, Senior Manager A confirmed to a Barclays senior

internal lawyer in a telephone call that any additional payments to the Qatari entities

(beyond what would be paid within the structure of the capital raising) would be for

other commercial services and at market rate. The Barclays senior internal lawyer

subsequently spoke with a Barclays external lawyer, informing them that, in

recognition of the overall relationship between Barclays and the Qatari entities,

Barclays intended to pay approximately £120 million in fees to the Qatari entities via

a separate and “not connected” commercial arrangement, and that this would be “a

commercial trans’n and not for the capital raising”. According to the Barclays senior

internal lawyer’s notes of the discussion, the Barclays external lawyer “agreed this

was fine and had been confirmed by Counsel”, and commented that, as no equity

prospectus was being produced, there was no need to consider whether the separate

transaction needed to be disclosed. The Barclays senior internal lawyer told the

Authority in interview that they were relying upon Senior Manager A’s confirmation

mentioned above when characterising the proposed arrangement in this way to the

Barclays external lawyer. The Barclays external lawyer told the Authority in

interview that they were not aware that Barclays was considering entering into an

advisory agreement in response to a requirement by the Qatari entities for additional

value in the October capital raising. This was consistent with the interview evidence

of the other senior external lawyer advising Barclays in relation to the October capital

raising.

Meetings of the Board and the Board Finance Committee on 26, 27 and 28 October

79.
Barclays plc’s Board met on 26 and 27 October 2008. By this stage, the key terms

of the October capital raising were broadly as they would be announced on 31

October 2008.

80.
Manuscript notes of the Board meeting on 26 October 2008 refer to a “broader

arrangement” with the Qatari entities and “co-operative actions” for which it appears

the Board understood an additional fee of £115 million would be paid.

81.
A paper circulated in advance of the Board meeting on 27 October 2008 referred in

a footnote to the cost of the October Agreement as part of the cost of the October

capital raising.

82.
At the Board meeting on 27 October 2008, the Board approved the proposed terms

of the capital raising and confirmed that the delegation of authority by the Board to

the Board Finance Committee at the meeting on 21 October 2008 remained in effect.

The following day, in order to avoid delay in implementing the capital raising, the

Board Finance Committee delegated authority to finalise all arrangements in

connection with the capital raising to a non-executive director and Senior Manager

A, acting jointly.

The draft October Agreement

83.
A draft of the October Agreement was sent on behalf of a Barclays senior manager

to a Barclays internal lawyer on 30 October 2008, the day before the capital raising

was announced. It was almost identical in content to the June Agreement, but was

expressed as providing “various services … in addition to” those set out in the June

Agreement. It did not include a figure for the amount of fees to be paid.

Final negotiations with the Qatari entities

84.
On 30 October 2008, a representative of the Qatari entities expressed concern to

two Barclays senior managers that the terms of the October capital raising would not

satisfy their requirement for value equivalent to 130p per share for their investments

across the June and October capital raisings.

85.
At a meeting later that day, representatives of the Qatari entities reiterated their

view to two Barclays senior managers that they were not being provided with

sufficient value for their participation in the capital raising. Manuscript notes taken

by one of the senior managers at the meeting referred to a requirement by the Qatari

entities for value equivalent to £758 million (an increase from the £600 million

previously sought due to movements in Barclays plc’s share price and warrant

valuations). The notes went on to value each element of the proposed capital raising,

estimating a total value of £452 million for the Qatari entities. This left a value gap

of £306 million. According to further notes taken by the senior manager after the

meeting, this value gap was only partially met by the proposed fees under the

October Agreement, which had by that stage increased to £185 million.

86.
This late requirement for additional value by the Qatari entities was considered by

Barclays senior managers (including Senior Manager A). An increase in the amount

of fees payable under the October Agreement was approved by Senior Manager A in

order to meet the requirement. Senior Manager A described this as a “commercial

bet” in interview with the Authority. As a result, the fees payable under the October

Agreement increased to £280 million. According to Barclays’ internal governance

procedures, the Board was required to approve any transaction which exceeded £150

million in size. However, neither the Board nor the Board Finance Committee was

aware of the £280 million fee or how it was calculated, and nor was the non-executive

director to whom, together with Senior Manager A, authority was delegated by the

Board Finance Committee on 28 October 2008. They were also not informed of how

Barclays senior managers had satisfied themselves that Barclays could receive value

from services under the October Agreement at least equal to the £280 million fee.

Signing of the October Agreement

87.
A Barclays senior manager signed the October Agreement on behalf of Barclays Bank

on 31 October 2008. It comprised a two-page letter from Barclays Bank to QH, which

started by saying that it was an extension of the June Agreement and was being

entered into “in recognition of the great success of the agreement to date, and the

enormous benefits we have derived from your assistance and introduction to

business opportunities”. The letter clarified that the terms and conditions of the June

Agreement “continue in full force and effect, subject to the variations set out in this

letter”. The letter then stated that QH would provide Barclays with “various services

… in addition to” those provided under the June Agreement and that QH may provide

some or all of the services in association with Challenger. Unlike the draft circulated

on the previous day, it specified that those services would include:

(1)
The development of Barclays’ business in the Middle East;

(2)
The furtherance and execution of Barclays’ emerging markets business

strategy;

(3)
The expansion of Barclays’ global commodities business;

(4)
Referral of opportunities in the oil and gas business sectors;

(5)
Introduction of infrastructure advisory and financing opportunities; and

(6)
Introduction of potential investors, clients or counterparties interested in

conducting a variety of business with Barclays.

88.
The services were to be provided over a period of five years, in return for which

Barclays Bank would pay 20 equal quarterly instalments of £14 million, a total of

£280 million.

89.
Similarly to the June Agreement, the existence of the October Agreement was largely

ignored in Barclays’ subsequent efforts to develop its business with the Qatari

entities, in Qatar or in the Middle East generally. For example, a briefing note

prepared in advance of a meeting between senior Barclays personnel and

representatives of the Qatar Investment Authority and QH on 6 June 2011 described

in detail Barclays’ relationship with Qatar since 2008, but did not mention the

Agreements. By contrast, the note did mention the Qatari entities’ investment in

Barclays.

Disclosure of the October capital raising

90.
On 31 October 2008, Barclays plc announced the October capital raising. Significant

concerns were raised by market analysts at the time, amongst other things regarding

the high cost of the October capital raising (including fees) and comparisons to the

cost of capital available from the UK Government.

91.
On 7 November 2008, Barclays plc issued a shareholder circular seeking the approval

of Barclays plc’s shareholders for the October capital raising. A general meeting took

place on 24 November 2008, at which Barclays plc’s shareholders gave their

approval.

92.
The following day (25 November 2008), Barclays plc published the prospectus

relating to the issue of warrants and Barclays Bank published the prospectuses

relating to the issue of RCIs and MCNs. The warrants prospectus confirmed that

Barclays plc and its directors accepted responsibility for the information contained in

the prospectus and stated that to the best of their knowledge “(having taken all

reasonable care to ensure that such is the case), the information contained in this

Prospectus is in accordance with the facts and does not omit anything to affect the

import of such information.” The other prospectuses contained similar wording in

respect of Barclays Bank.

93.
As in June 2008, the directors of Barclays plc (including Senior Manager A) also

signed Letters of Responsibility which confirmed their responsibility for the warrants

prospectus and stated that they “accept responsibility for the information contained

in the Prospectus and confirm that to the best of [their] knowledge, having taken all

reasonable care to ensure that such is the case, the information contained in it is in

accordance with the facts and does not omit anything likely to affect the import of

such information”.

94.
The announcement, the shareholder circular and, between them, the three

prospectuses associated with the October capital raising disclosed the commissions

that the Qatari entities and the other anchor investor would receive in consideration

for their participation in the October capital raising. They also disclosed that QH

would receive an arrangement fee. Neither the announcement, the shareholder

circular nor any of the prospectuses published by Barclays disclosed the October

Agreement (and thus did not disclose the fees paid under it, nor their connection to

the Qatari entities’ participation in the capital raising).

Judgment of Waksman J in the PCP case1

95.
On 26 February 2021, Mr Justice Waksman issued his judgment in the PCP case. PCP

was the original owner of three SPVs which agreed to invest in the October capital

raising, but lost control of the SPVs on 20 November 2008, one week before the

subscriptions were completed by the payment of the monies due by the investors.

PCP claimed that, in October 2008, a Barclays senior manager had falsely

represented to the principal of PCP that, amongst other things, the SPVs were getting

the “same deal” in respect of the investment as the Qatari entities, and that it relied

upon this representation (and other false representations) by causing the SPVs to

subscribe a total of £3.25 billion in the October capital raising. Further, PCP alleged

that if the misrepresentations had not been made, it would have negotiated with

Barclays for the same deal, pro rata, for the SPVs and would have obtained significant

additional value.

96.
Waksman J found that the “same deal” representation was made as alleged by PCP

and that PCP relied on it. Further, he found that the representation was false because

the October Agreement was clearly part of the price required by and paid to the

Qatari entities for their investment in the October capital raising and was part of the

deal. He also found that the Barclays senior manager (who had signed the October

Agreement on behalf of Barclays Bank) made this false representation knowingly; in

other words, they knew that the SPVs were not getting the same deal as the Qatari

entities. As for causation, Waksman J found that, had PCP known the truth, it would

have negotiated with Barclays for the same deal, pro rata, as the Qatari entities, and

would have obtained additional value of £615 million (subject to the approval of

Barclays’ shareholders, of which Waksman J considered there was a 60% chance).

97.
In his judgment Waksman J considered the June Agreement to be important context

for the events in October 2008. He commented that the June Agreement “was clearly

part of the package deal for [the Qatari entities] along with the subscription

agreement”, and that “the documents do not appear to have received much if any

detailed consideration at the time in terms of what particular services would be

offered and how they could be valued at £42m over 3 years”. In respect of the

meetings on 19 June 2008, he stated, “On the face of it, there is no evidence that

the [Board Finance Committee] or the [board of Barclays Bank] was told that there

had been an additional 1.75% fee agreed with [QH] or that the [June Agreement]

was the means by which it would be paid”.

98.
In respect of the October Agreement, Waksman J noted that the “commercial reality

was that there was a connection” between it and the October capital raising, and

that the October Agreement “was clearly designed as a mechanism to enable [the

Qatari entities] to obtain their blended entry price of 130p”. He also stated, “If [the

October Agreement] had not been made and there was no mechanism to pay the

£280m, [the Qatari entities] would not have invested, as Barclays well knew”.

99.
For the avoidance of doubt, in this Notice the Authority makes no criticism of any of

the investors.

FAILINGS

100. The statutory and regulatory provisions relevant to this Notice are referred to in

LR 1.3.3R

101. For the reasons set out in paragraphs 101 to 106 below, the Authority considers that

Barclays plc failed to take reasonable care to ensure that the information contained

in the announcements and prospectuses that it published associated with the capital

raisings was not misleading, false or deceptive and did not omit anything likely to

affect its import, in breach of LR 1.3.3R.

102. The Agreements formed part of the basis on which the Qatari entities agreed to

participate in the capital raisings. Barclays plc was aware of this, but did not disclose

the fees paid under the Agreements, nor their connection to the Qatari entities’

participation in the capital raisings.

103. The Qatari entities agreed to participate for over 50% of the total capital raised in

June 2008 and over 31% of the capital raised in October 2008. Disclosure of the fees

payable under the Agreements as payments in connection with the Qatari entities’

participation in the capital raisings would have more than doubled the disclosed level

of payments due to the Qatari entities in connection with their participation in the

June capital raising from £34.5 million to almost £77 million; and more than tripled

the disclosed level of payments to the Qatari entities in connection with their

participation in the October capital raising from £128 million to more than £408

million. This would have been highly relevant to shareholders, investors and the

wider market.

104. Disclosure of the fees payable under the Agreements would have increased the total

disclosed payments in connection with the Qatari entities’ participation in the October

capital raising from just over £256 million (3.5% of the total capital due to be raised)

to more than £536 million (7.34% of the capital due to be raised). These matters

would have been particularly relevant in October 2008 in circumstances where there

were concerns about the high cost of the October capital raising and the availability

of capital from the UK Government.

105. Accordingly, the omission of these details from the announcements and prospectuses

associated with the capital raisings rendered the information in them misleading,

false and/or deceptive and meant that it omitted matters likely to affect its import.

106. In respect of the June capital raising, Barclays received legal advice that the wording

in the announcement and prospectus was acceptable and that it did not need to

disclose any further information regarding the June Agreement, providing it was

satisfied that the value it could expect to receive from services pursuant to the June

Agreement fully justified the fees to be paid to QH. However, notwithstanding this

advice, Barclays plc failed to take reasonable care to comply with its obligations

under LR 1.3.3R because:

(1)
Barclays plc did not consider its obligations under LR 1.3.3R, or seek, or obtain,

specific legal advice regarding those obligations.

(2)
When advising on disclosure, Barclays’ external lawyers were not fully

informed, and Barclays plc did not take reasonable care to ensure they were

fully informed, of the connection between the June Agreement and the capital

raising. In particular, they were not aware that the genesis of the June

Agreement was QH’s requirement for additional fees for participating in the

capital raising, that the Qatari entities would not participate in the capital

raising if QH did not receive these additional fees, that the Agreement was

connected to the capital raising and was not a separate commercial transaction,

and that the fees payable to QH under the advisory agreement were calculated

by reference to the Qatari entities’ maximum commitment in the capital raising.

(3)
Barclays plc did not take reasonable care to ensure that the value Barclays

could expect to receive from services pursuant to the June Agreement fully

justified the fees to be paid to QH under the June Agreement:

(a)
No reasonable attempt was made by Barclays plc to assess the value of

the opportunities that the June Agreement offered before it was entered

into. The only attempt at assessment was an informal exercise

undertaken by a Barclays senior manager before the terms of the June

Agreement were known. There was no systematic assessment, no

documented assessment and no coherent effort at valuation. There was

also no assessment before the June Agreement was entered into of the

value it added over and above the opportunities Barclays would in any

event have had in the Middle East, and any additional benefit that would

have flowed from the Qatari entities’ participation in the June capital

raising, and no assessment of the gross income, costs and hence net

profit that needed to be generated to justify the fees.

(b)
The fees were calculated by reference to what QH required (an additional

1.75% of its maximum commitment plus interest) in return for its

investment in the June capital raising, rather than by reference to an

assessment of the value of the services that QH could provide. No

assessment of the value was undertaken when QH asked for a significant

increase in the fees on account of Challenger’s participation in the capital

raising.

(4)
Neither the Board nor the Board Finance Committee, which was given authority

by the Board to take decisions on behalf of the Board in relation to the June

capital raising, was fully informed of the connection between the June

Agreement and the June capital raising. They were also not informed of how

Barclays senior managers had satisfied themselves that Barclays could receive

value at least equal to the fees payable under the June Agreement.

107. In respect of the October capital raising, Barclays received legal advice that it did

not need to disclose the October Agreement providing it was satisfied that the value

it could expect to receive from services pursuant to the October Agreement fully

justified the fees to be paid to QH. However, notwithstanding this advice, Barclays

plc failed to take reasonable care to comply with its obligations under LR 1.3.3R

(1)
Barclays plc did not consider its obligations under LR 1.3.3R, or seek, or obtain,

specific legal advice regarding those obligations.

(2)
When advising on disclosure, Barclays’ external lawyers were not given

complete and accurate information, and Barclays plc did not take reasonable

care to ensure they were fully and accurately informed, of the connection

between the October Agreement and the capital raising. In particular, they

were not aware that the genesis of the October Agreement was QH’s

requirement for additional fees for participating in the capital raising, that the

Qatari entities would not participate in the capital raising if QH did not receive

these additional fees, that the October Agreement was connected to the capital

raising and was not a separate commercial transaction, and that the fees

payable under the October Agreement were calculated by reference to the

value required by QH.

(3)
Barclays plc did not take reasonable care to ensure that the value Barclays

could expect to receive from services pursuant to the October Agreement fully

justified the fees to be paid to QH under the October Agreement:

(a)
No reasonable attempt was made by Barclays plc to assess the value of

the opportunities that the October Agreement offered before it was

entered into. Instead, Senior Manager A made a rapid and informal

judgement, which they later described to the Authority as a “commercial

bet”. There was no systematic assessment, no documented assessment

and no coherent effort at valuation. There was also no assessment before

the October Agreement was entered into of the value it added over and

above the opportunities Barclays would in any event have had in the

Middle East, and any additional benefit that would have flowed from the

Qatari entities’ participation in the October capital raising, and there was

no assessment of the value the October Agreement added in excess of

Barclays’ existing opportunities under the June Agreement. In addition,

there was no assessment of the gross income, related costs and hence

net profit that needed to be generated to justify the fees.

(b)
The fees were calculated by reference to what QH required (which was

financially equivalent to QH having invested in both the June and October

capital raisings at 130p per share) in return for its investment in the

October capital raising, rather than by reference to an assessment of the

value of the services that the Qatari entities could provide. No

assessment of the value was undertaken when QH made a late

requirement for a significant increase in the fees due to adverse

movements in Barclays plc’s share price and warrant valuations.

(4)
Neither the Board nor the Board Finance Committee, which was given authority

by the Board to take decisions on behalf of the Board in relation to the October

capital raising, was fully informed of all relevant facts regarding the October

Agreement. In particular, the Board’s approval was required for the £280

million fee payable to QH under the October Agreement, but neither the Board

nor the Board Finance Committee was made aware of the £280 million fee

under the October Agreement or how it was calculated. They were also not

informed of how Barclays senior managers had satisfied themselves that

Barclays could receive value at least equal to the £280 million fee.

108. For the reasons set out at paragraphs 101 to 104 above, the Authority considers that

Barclays plc’s failure to include details of the fees payable to QH under the October

Agreement, and their connection to the October capital raising, in its shareholder

circular issued on 7 November 2008 meant that the circular did not contain all

information necessary to allow its shareholders to make a properly informed decision

as to the voting action required of them in connection with the October capital

raising, in breach of LR 13.3.1R(3).

Recklessness and Listing Principle 3

109. The Authority considers that Barclays plc, including Senior Manager A (whose state

of mind the Authority attributes to Barclays plc in the circumstances), acted

recklessly, in unreasonably approving the announcement, the warrants prospectus

and the circular associated with the October capital raising, in circumstances where

Barclays plc must have been aware that it had not taken reasonable care to ensure

that the value Barclays expected to receive from services pursuant to the October

Agreement fully justified the fees that it was required to pay to QH under it,

amounting to £280 million over five years, and was therefore aware of the clear risk

that:

(1)
the omission of any reference to the October Agreement, the fees to be paid

under the October Agreement and their connection to the October capital

raising from the announcement and the prospectus published by Barclays plc

and associated with the October capital raising rendered the information

contained in those documents misleading, false and/or deceptive and meant

that it omitted matters likely to affect the import of that information; and

(2)
the omission of those matters from the circular sent by Barclays plc to its

shareholders in connection with the October capital raising meant that it did

not contain all information necessary to allow its shareholders to make a

properly informed decision as to the voting action required of them.

110. The Authority therefore considers that Barclays plc’s breaches of LR 1.3.3R (in

relation to the October capital raising) and LR 13.3.1R(3) were committed recklessly

and considers that, in respect of its failure to disclose the fees to be paid to QH under

the October Agreement and their connection to the October capital raising, Barclays

plc did not act with integrity towards its actual and potential shareholders, in breach

of Listing Principle 3.

SANCTION

Financial penalty

111. The Authority’s policy on the imposition of financial penalties is set out in DEPP.

Barclays plc’s misconduct occurred prior to 6 March 2010, the date on which the

Authority’s current penalty regime came into force. In determining the financial

penalty proposed, the Authority has had regard to the guidance in force at the time

the misconduct occurred. The Authority considers the following factors to be

particularly important.

Deterrence (DEPP 6.5.2G(1))

112. Given the circumstances of the case, the Authority considers it necessary to send a

robust message to listed companies regarding the fundamental importance of

complying with an issuer’s obligations regarding regulatory announcements,

shareholder circulars and prospectuses and acting with integrity. Listed companies

must make appropriate disclosures. When they fail to do so, in particular with a lack

of integrity, it is important that the Authority imposes a financial penalty that acts

as a credible deterrent.

113. It is essential that listed companies disclose all relevant information in connection

with capital markets activities such as capital raisings. This was particularly

important in the October capital raising where the activity required approval by

shareholders.

Nature, seriousness and impact of the breach (DEPP 6.5.2G(2))

114. The Authority considers the breaches in this case to be particularly serious for the

following reasons:

(1)
The misconduct described in this Notice in respect of the October

Announcement demonstrates a lack of integrity by Barclays plc towards its

shareholders and potential investors.

(2)
The June and October capital raisings were extremely significant and high-

profile transactions undertaken against the backdrop of the global financial

crisis, most notably in October 2008. The capital raisings and the terms on

which they were transacted were important for Barclays, its shareholders and

the wider market in circumstances where there were widespread concerns

about the financial stability of the UK’s major banks, large rights issues had

been announced by RBS and HBOS in April 2008 and the UK Government had

announced unprecedented capital injections into certain major UK banks in

mid-October 2008.

(3)
Unlike those banks, Barclays had obtained capital from strategic and other

investors by means of its capital raisings. This differentiated Barclays from its

competitors and in October 2008 demonstrated that Barclays was able to raise

capital without needing or seeking assistance from the UK Government. These

were very significant messages for Barclays to send to the market at the time.

(4)
Disclosure of the fees payable under the Agreements and their connection to

the capital raisings would have doubled and tripled the disclosed payments to

the Qatari entities in connection with the June and October capital raisings

respectively. It would have revealed that there was a significant discrepancy

in the level of payments to different investors.

(5)
Shareholders and other investors were entitled to receive all relevant

information regarding the June and October capital raisings, particularly given

the unusual circumstances and extreme uncertainty in the market. This would

have been particularly relevant in October 2008 when Barclays plc’s

shareholders approved the October capital raising without being properly

informed as to the terms of the Qatari entities’ participation, in circumstances

where alternative capital was available from the UK Government.

The extent to which the breach was deliberate or reckless (DEPP 6.5.2G(3))

115. The Authority considers that Barclays plc acted recklessly in respect of its failure to

disclose the fees to be paid to QH under the October Agreement and their connection

to the October capital raising.

Size, financial resources and other circumstances (DEPP 6.5.2G(5))

116. The Authority has had regard to the size of the financial resources of Barclays plc.

Barclays plc is a FTSE 100 UK listed company and one of the UK’s largest banking

and financial services companies, with a market capitalisation at the time of between

£15 billion and £19 billion.

Other action taken by the Authority (DEPP 6.5.2G(10))

117. The Authority has taken into account penalties imposed by the Authority on other

listed companies. The Authority has also had regard to the principal purpose for

which it imposes sanctions, namely to promote high standards of regulatory conduct.

118. The Authority considers in all the circumstances that the seriousness of the breaches

merits a substantial financial penalty. The Authority has reassessed the level of this

financial penalty in light of the seriousness of the breach and determined that it

should be reduced.

119. The Authority has therefore decided to impose a financial penalty of £30 million.

REPRESENTATIONS

120. Annex B contains a brief summary of the key representations made by Barclays plc

in response to the Warning Notice and how they have been dealt with. In making

the decision which gave rise to the obligation to give this Notice, the Authority has

taken into account all of the representations made, whether or not set out in Annex

B.

PROCEDURAL MATTERS

121. This Notice is given to Barclays plc under and in accordance with section 390 of the

Act. The following statutory rights are important.

Decision maker

122. The decision which gave rise to the obligation to give this Notice was made by the

Settlement Decision Makers.

Manner and time for payment

123. The financial penalty must be paid in full by Barclays plc to the Authority no later

than 9 December 2024.

If the financial penalty is not paid

124. If all or any of the financial penalty is outstanding on 10 December 2024, the

Authority may recover the outstanding amount as a debt owed by Barclays plc and

due to the Authority.

125. Sections 391(4), 391(6) and 391(7) of the Act apply to the publication of information

about the matter to which this notice relates. Under those provisions, the Authority

must publish such information about the matter to which this notice relates as the

Authority considers appropriate. The information may be published in such manner

as the Authority considers appropriate. However, the Authority may not publish

information if such publication would, in the opinion of the Authority, be unfair to

you or prejudicial to the interests of consumers or detrimental to the stability of the

UK financial system.

126. The Authority intends to publish such information about the matter to which this

Final Notice relates as it considers appropriate.

Authority contact

127. For more information concerning this matter generally, contact Ross Murdoch (direct

line: 0207 066 3999 / email: ross.murdoch@fca.org.uk) or Bob Beauchamp (direct

line: 020 7066 5302 / email: bob.beauchamp@fca.org.uk) at the Authority.

Financial Conduct Authority, Enforcement and Market Oversight Division

ANNEX A

RELEVANT STATUTORY AND REGULATORY PROVISIONS

1.
The United Kingdom Listing Authority (“UKLA”) is the part of the Authority that acts

as the competent authority under Part VI of the Act. Under that Part, it has

responsibility for making and maintaining the Listing Rules, the Disclosure and

Transparency Rules and the Prospectus Rules.

2.
The Authority is authorised pursuant to section 91 of the Act, if it considers that an

issuer of listed securities has contravened a requirement imposed by or under the

Listing Rules or the Disclosure and Transparency Rules, to impose on the issuer a

penalty in respect of the contravention, of such amount as it considers appropriate.

Regulatory provisions

3.
Listing Rule 1.3.3R, in the UKLA listing rules in the Handbook, provides that: “An

issuer must take reasonable care to ensure that any information it notifies to a RIS

or makes available through the [Authority] is not misleading, false or deceptive and

does not omit anything likely to affect the import of the information”.

4.
Listing Rule 13.3.1R(3), in the UKLA listing rules in the Handbook, provides that:

“Every circular sent by a listed company to holders of its listed securities must:… (3)

if voting or other action is required, contain all information necessary to allow the

security holders to make a properly informed decision”.

5.
Listing Principle 3, which applies to listed companies with a premium listing, provides

that: “A listed company must act with integrity towards holders and potential holders

of its listed equity shares”.

Policy/guidance

6.
When considering imposing any financial penalty under the Act, the Authority follows

the policy set out in DEPP (and which is being applied as it stood prior to 6 March

2010, for the reasons set out in the body of this Notice). The Authority will also have

regard to Chapter 7 of the Enforcement Guide, which forms part of the Handbook.

7.
Under DEPP 6.2.1G, the Authority will consider the full circumstances of the case

when determining whether or not to take action for a financial penalty.

8.
Under DEPP 6.5.2G, when determining the level of the financial penalty, the

Authority will consider all the circumstances of the case and will have regard to the

following non-exhaustive list of factors which may be relevant:

(1) Deterrence;

(2) The nature, seriousness and impact of the breach in question;

(3) The extent to which the breach was deliberate or reckless;

(4) Whether the person on whom the penalty is to be imposed is an individual;

(5) The size, financial resources and other circumstances of the person on whom

the penalty is to be imposed;

(6) The amount of benefit gained or loss avoided;

(7) Difficulty of detecting the breach;

(8) Conduct following the breach;

(9) Disciplinary record and compliance history;

(10) Other action taken by the [Authority] (or a previous regulator);

(11) Action taken by other domestic or international regulatory authorities;


(12) [Authority] guidance and other published materials; and

(13) The timing of any agreement as to the amount of the penalty.

ANNEX B

REPRESENTATIONS

1.
A summary of the key representations made by Barclays plc, and the Authority’s
conclusions in respect of them (in bold), is set out below.

Representations relating to both of the Agreements

Summary of Barclays plc’s position

2.
Barclays plc denies any wrongdoing and denies that it acted with a lack of integrity.
At all times Barclays sought and received internal and external independent legal
advice, from lawyers who were fully sighted on all aspects of the developing
transactions between Barclays and the Qatari entities, and acted in accordance with
that advice.

3.
The purpose of the Agreements was as agreed between Barclays and QH: (1)
Barclays would obtain valuable services from the Qatari entities which would help
Barclays expand its presence in the Middle East; and (2) Barclays would avoid having
to pay additional fees for the capital raisings which would not have delivered any
additional value to Barclays.

4.
Barclays plc accepts that the Agreements helped Barclays meet the Qatari entities’
requirement for additional value in connection with their participation in the capital
raisings and that they were material to the Qatari entities’ decision to invest and
formed part of the commercial basis upon which they agreed to invest. However,
this does not render the disclosures made by Barclays plc misleading, false and/or
deceptive.

5.
The allegations against Barclays plc are of the utmost seriousness and therefore the
Authority needs to be satisfied that there is clear and cogent evidence of wrongdoing.
There is no such clear or cogent evidence. When considered fairly and holistically,
the picture the contemporaneous evidence shows is a bank involved in important
capital raisings, working under significant pressures, and engaging numerous
advisors, to assist it in complying with its legal and regulatory obligations. The
context of the financial crisis is very important. Particularly in October 2008,
decisions were made under huge pressure and at a pace that meant that some of
the processes around decision-making, the evidence for decisions being taken and
the underlying assessment may be less fulsome than would be the case in normal
circumstances. The absence of particular documents, for example letters of advice
or detailed notes of discussions, does not, in those circumstances, suggest a lack of
reasonable care.

6.
For the reasons set out in paragraphs 101 to 106 of this Notice, the
Authority considers that Barclays plc failed to take reasonable care to
ensure that the information contained in the announcements and
prospectuses that it published associated with the capital raisings was not
misleading, false or deceptive and did not omit anything likely to affect its
import, in breach of LR 1.3.3R. As explained in paragraph 107 of this Notice,
the Authority considers that Barclays plc breached LR 13.3.1R(3) by issuing
a circular on 7 November 2008 that did not contain all information
necessary to allow its shareholders to make a properly informed decision as

to the voting action required of them in connection with the October capital
raising. For the reasons set out in paragraphs 108 to 109 of this Notice, the
Authority also considers that Barclays plc did not act with integrity in
respect of its failure to disclose the fees to be paid to QH under the October
Agreement and their connection to the October capital raising, in breach of
Listing Principle 3.

7.
Although Barclays sought and received legal advice from its internal and
external lawyers in relation to its disclosure obligations with respect to the
Agreements, this advice did not specifically cover its obligations under LR
1.3.3R and Barclays’ external lawyers gave their advice in circumstances
where they had not been fully informed of the connection between the
Agreements and the capital raisings. Further, Barclays did not act on the
advice given as, despite it being consistently stressed by Barclays’ internal
and external lawyers that Barclays needed to be satisfied that the
Agreements would generate real value to justify the fees to be paid to QH
thereunder, it failed to carry out adequate valuation assessments.

8.
In respect of the purpose of the Agreements, the Authority considers that,
whilst it might have been the case that Barclays hoped to obtain valuable
services from the Qatari entities pursuant to the Agreements which would
help it to expand its presence in the Middle East, it was clearly the case that
the Agreements were entered into as a way of meeting the Qatari entities’
requirements for additional value and thereby ensure that they would
participate in the capital raisings.

9.
The Authority is satisfied that the evidence supports its conclusions. The
Authority acknowledges the context in which decisions were made
regarding the capital raisings, but does not consider that this excuses
Barclays plc for failing to comply with its regulatory obligations. The
standards to be applied were not lower because of the financial crisis and,
although decisions were made under pressure and at pace, they had
important consequences and Barclays had the resources to ensure that they
were taken properly. The Authority therefore considers that the lack of
documented records, particularly of the advice sought and given by
Barclays’ external lawyers, and of the valuation assessments carried out,
supports its conclusion that Barclays plc failed to take reasonable care to
comply with its regulatory obligations.

Barclays’ disclosure decisions

10.
The June Agreement was disclosed because Barclays was keen to publicise the fact
it had established a strategic relationship with the Qatari entities at the same time
as the latter was investing in Barclays. The October Agreement was not mentioned
in any announcement, prospectus or circular because it was an extension to the June
Agreement and so the same commercial rationale for its disclosure did not apply.

11.
The fact that the existence of the June Agreement was disclosed does not
affect the Authority’s conclusion that the announcement and prospectus
associated with the June capital raising were misleading, false and/or
deceptive and that the disclosed information omitted matters likely to affect
its import, as neither the fees paid under the June Agreement, nor the
nature of the commercial connection between it and the June capital raising,

were disclosed. For similar reasons, the failure by Barclays to disclose any
information at all regarding the October Agreement in the announcement
and prospectuses associated with the October capital raising means that
those documents were also misleading, false and/or deceptive and that
they also omitted matters likely to affect the import of the information
disclosed.

Knowledge and advice of Barclays’ lawyers

12.
Barclays sought legal advice from its internal and external lawyers on all aspects of
the Agreements. That advice encompassed the appropriateness of the Agreements
and whether or not Barclays was obliged to disclose them. In giving their advice,
both Barclays’ internal and external lawyers were aware of the following:

(a)
the genesis of the Agreements;

(b)
the importance of the Agreements to the Qatari entities’ subscription: the
lawyers were aware that the Qatari entities saw the Agreements as a means to
delivering the additional value they were seeking;

(c)
how the fees under them had been calculated. In June, Barclays’ internal and
external lawyers exchanged drafts of the June Agreement which showed how
the fee had been calculated. In October 2008, Barclays’ lawyers knew that the
October Agreement was used because the Qatari entities were seeking greater
overall value than Barclays could lawfully deliver by way of fees within the
October capital raising;

(d)
the timing and drafting of the Agreements. Barclays’ lawyers were involved in
drafting the terms of the Agreements and in negotiations with QH’s lawyers;
and

(e)
the nature and scope of the services and the level of discussions with the Qatari
entities. The lawyers in charge of drafting the Agreements were briefed by a
Barclays senior manager in both June 2008 and October 2008 as to the services
which the Qatari entities were going to provide following discussions between
the Barclays senior manager and the Qatari entities. They advised that, once
the June Agreement was entered into, the services could be refined by mutual
agreement and there was no need to detail them in the agreement.

13.
Barclays was advised by its internal lawyers, who themselves had been advised by
its external lawyers, that if Barclays was satisfied that the Qatari entities could offer
business opportunities to the value of the amounts payable under the Agreements
(and Barclays was so satisfied) then: (1) the arrangements were appropriate; and
(2) the fact of the Agreements and the advisory fees payable thereunder did not
need to be disclosed. Barclays duly followed that advice, although for commercial
reasons Senior Manager A made the decision to disclose the fact of the June
Agreement. Barclays’ internal and external lawyers were aware of this decision and
advised on the language to be included in the announcement and prospectus.

14.
The evidence shows that the genesis of the Agreements was shared openly with
Barclays’ external lawyers. For example: (1) prior to the June Agreement, Barclays’
external lawyers were party to discussions with Barclays about possible “sweeteners”

for anchor investors; (2) the Authority accepts that, at the time of the June
Agreement, Barclays’ external lawyers could have “gleaned” the genesis of the June
Agreement from the written information that was made available to them by
Barclays; (3) Barclays’ external lawyers commented at interview that they would
have given the same advice in relation to disclosure irrespective of their knowledge
as to the genesis of the June Agreement; and (4) Barclays’ external lawyers have
accepted that they knew, at least in relation to the October Agreement, that if the
Qatari entities did not get the deal they wanted in relation to the October Agreement
then they would not participate in the capital raising (i.e. that there was a degree of
interconnectivity).

15.
Even if it could be said that Barclays’ external lawyers somehow missed the
significance of the genesis of the Agreements, it was reasonable for Barclays’ internal
lawyers, and therefore Barclays, to proceed on the basis that the external lawyers
were aware of all the information they needed to know to provide fully informed
advice, and therefore to rely upon that advice.

16.
Barclays’ internal lawyers provided detailed instructions to Barclays’ external lawyers
to provide advice on all aspects of disclosure, including the Listing Rules. As the
Authority has accepted, Barclays’ external lawyers considered LR 1.3.3R when giving
advice. A Barclays internal lawyer’s evidence to the Authority was that they “both
knew of the general disclosure obligations pursuant to the Listing Rules and believed
that [Barclays’ external lawyers] had taken them into account in advising the Bank
on their disclosure obligations”. Barclays’ internal lawyers’ evidence makes it clear
that Barclays’ external lawyers worked closely alongside Barclays’ employees in
respect of the October capital raising. It is also clear from the evidence that anyone
working on the transaction at the time would have known, and expected, that
Barclays’ external lawyers were engaged fully with every detail of the capital raisings.

17.
The Authority acknowledges that Barclays sought and received legal advice
on whether the Agreements and the fees thereunder needed to be disclosed,
and that the advice provided was that Barclays did not need to disclose any
further information regarding the June Agreement, and that it did not need
to disclose any information in respect of the October Agreement, provided
that Barclays was satisfied that the value it could expect to receive from
services pursuant to the Agreements fully justified the fees. However,
Barclays plc did not seek, or obtain, specific legal advice regarding its
obligations under LR 1.3.3R. Further, in respect of each Agreement, the
Authority considers that the evidence shows that Barclays’ external lawyers
were not fully informed of the connection between the Agreement and the
capital raising. Accordingly, the Authority considers that the fact that
Barclays sought and received legal advice does not demonstrate that
Barclays plc took reasonable care to comply with its obligations under LR
1.3.3R.

18.
The evidence of Barclays’ external lawyers in interview with the Authority
is that they were not aware of how the Agreements were connected to the
Qatari entities’ participation in the capital raisings. There is also no
contemporaneous evidence which clearly shows that Barclays’ external
lawyers were fully informed of this connection. Contrary to Barclays’ plc’s
submissions, the Authority considers that the evidence supports the
conclusion that Barclays’ external lawyers were not aware that the genesis

of each Agreement was the Qatari entities’ requirement for additional fees
for participating in the capital raising, that the Qatari entities would not
participate in the capital raising if QH did not receive these additional fees,
or that the fees payable to QH were calculated by reference to the Qatari
entities’ maximum commitment in the June capital raising (under the June
Agreement) and by reference to the value required by QH (under the
October Agreement).

19.
The fact that Barclays’ external lawyers might have been able to infer the
connection between the June Agreement and the Qatari entities’
participation in the June capital raising from references in various emails
that they received does not support Barclays’ submission that it took
reasonable care to comply with its obligations under LR 1.3.3R. Barclays’
external lawyers’ interview evidence is that they were not aware of how the
June Agreement and the June capital raising were connected and that they
did not appreciate the import of the relevant passages in these emails. In
addition, in order to take reasonable care, it was not sufficient for Barclays
to rely on its external lawyers inferring the connection from various pieces
of information that they received. Instead, Barclays needed to take
reasonable steps to ensure that Barclays’ external lawyers had all the
information they needed when giving advice. However, Barclays did not
clearly and comprehensively set out the relevant facts in any document and
there is no contemporaneous evidence that Barclays’ external lawyers were
aware of all relevant facts when giving advice.

20.
The fact that Barclays’ external lawyers commented at interview that, had
they known the full picture regarding the June Agreement, they would not
necessarily have advised Barclays to make additional disclosure, does not
demonstrate that Barclays took reasonable care to comply with its
regulatory obligations at the relevant times. Nor does it demonstrate that
Barclays complied with its disclosure obligations in not mentioning the fees
payable under the Agreements or their connection to the capital raisings in
the published material relating to the capital raisings. For the reasons set
out in paragraphs 102 to 104 of this Notice, the Authority considers that the
omission
of
this
information
rendered
the
information
in
the
announcements and prospectuses associated with the capital raisings
misleading, false and/or deceptive and meant that it omitted matters likely
to affect its import.

21.
It was not reasonable for Barclays to proceed on the assumption that
Barclays’ external lawyers were fully aware of the connection between the
Agreements and the capital raisings and that they had all the information
they needed to provide fully informed advice. Barclays should have properly
and fully instructed its external lawyers and ensured that they were aware
of all relevant information, rather than relying on them to infer the true
position for themselves.

22.
Barclays’ external lawyers did not refer to LR 1.3.3R in any advice that they
gave on disclosure. However, the Authority acknowledges that, at least in
relation to the June Agreement, based on answers given by a Barclays
external lawyer in interview with the SFO, Barclays’ external lawyers may
have given some thought to the requirements of LR 1.3.3R, although the

Barclays external lawyer did not state this explicitly. However, the advice
that they provided was premised on what they had been told, which did not
include the true nature of the connection between the June Agreement and
the capital raising. Without such knowledge, Barclays’ external lawyers
could not properly advise on Barclays’ disclosure requirements. Further,
there is no evidence that Barclays’ internal lawyers applied their minds to
what effect the connection had on the specific disclosure requirements
under LR 1.3.3R. There is no reference to the wording of LR 1.3.3R in the
contemporaneous evidence and there was no attempt to justify non-
disclosure through an explanation of what the rule requires. Instead,
Barclays’ internal lawyers appear to have concluded that any connection
was irrelevant if the June Agreement was a lawful agreement. Therefore,
the Authority considers it is reasonable to conclude that the legal advice
provided did not properly consider LR 1.3.3R.

Assessments of value

23.
Barclays gave proper consideration to the value of the opportunities which they could
derive from the Agreements before they were entered into. Having made enquiries
and considered the information available at the time, Barclays’ representatives
reasonably reached the conclusion that Barclays could receive value exceeding the
amounts it was obliged to pay under the Agreements. This was a reasonable,
commercially sound judgement call based on the consideration of several factors,
including the high investment appetite of the Qatari entities, the expected growth of
certain business sectors such as commodities and private equity, the scale of the
business opportunities which had already been offered and the ambitions of Barclays
in certain areas. That this was a reasonable judgement call was confirmed by
Waksman J in his judgment in the PCP proceedings, who stated that the Agreements
concerned the provision of business opportunities which could be “extremely
lucrative” for Barclays.

24.
The steps taken, including by a senior manager in June and by Senior Manager A in
October, to be satisfied with the value Barclays could receive from the Qatari entities
were entirely consistent with the scope of the Agreements. Barclays’ internal and
external lawyers did not advise that a detailed assessment of the value which the
Agreements could deliver should be carried out before the Agreements were entered
into and were content with the level of assessment carried out. In addition,
Waksman J found that “no extensive modelling and research” was necessary in
connection with agreements of the type of the Agreements and that “[a]ssessments
of value in this context are, to a significant extent, subjective matters”.

25.
The legal advice provided to Barclays by its internal and external lawyers
throughout the capital raisings emphasised that the Agreements were only
lawful arrangements which could be used to help meet the Qatari entities’
requirements for additional value, if Barclays was satisfied that it would
receive services to the value of the amounts payable thereunder, and that
this was not an assessment that the lawyers themselves could make.
However, despite this advice, Barclays did not reasonably assess the value
of the opportunities that the Agreements offered before they were entered
into. In respect of the June Agreement, the only attempt at assessment was
an informal exercise undertaken by a Barclays senior manager before the
terms of the Agreement were known. In respect of the October Agreement,

Senior Manager A made a rapid and informal judgement, which they later
described to the Authority as a “commercial bet”.

26.
Barclays had the necessary resources to carry out a proper valuation of
potential business opportunities. However, in respect of both Agreements,
there was no systematic assessment, no documented assessment and no
coherent effort at valuation. There was also no assessment of the value the
Agreements added over and above the opportunities Barclays would in any
event have had in the Middle East, and any additional benefit that it would
have accrued as a result of the Qatari entities’ participation in the capital
raisings. Further, in respect of the October Agreement, there was no
assessment of the value the Agreement added in excess of Barclays’
existing opportunities under the June Agreement. In addition, in respect of
both Agreements, there was no assessment of the net profit (considering
the gross income and expected costs including capital required) that needed
to be generated to justify the fees. The Authority therefore considers that
the steps at assessment valuations carried out by Barclays were clearly
inadequate.

27.
In addition, there is no evidence that Barclays undertook a serious,
concerted effort to track the performance of the Agreements after they had
been entered into until there was regulatory interest.

The business opportunities which derived from the Agreements

28.
The Agreements have delivered value to Barclays over the years and contributed to
the establishment of its strong reputation in the Middle East. This is consistent with
the expectations of Barclays senior managers as to the nature and value of the
opportunities which could be offered under the Agreements and supports Barclays
plc’s position that the conclusion reached by Barclays in this respect was reasonable.

29.
As Waksman J found, the fact that contemporaneous evidence concerning the
business opportunities did not specifically reference the Agreements does not mean
that they “did not play a role or, more importantly, that Barclays did not intend to
take benefits under [the Agreements]”. The fact that business opportunities were
offered by the Qatari entities in the first place is consistent with the scope of the
Agreements, regardless of whether the opportunities were subsequently secured.

30.
The Authority does not consider that there is clear evidence that the
Agreements have delivered value to Barclays over the years. Instead, the
evidence shows that the existence of the Agreements was largely ignored
in Barclays’ subsequent efforts to develop its business with the Qatari
entities, in Qatar or in the Middle East generally. For example, a briefing
note prepared in advance of a meeting between senior Barclays personnel
and representatives of the Qatar Investment Authority and QH on 6 June
2011 described in detail Barclays’ relationship with Qatar since 2008, but
did not mention the Agreements.

31.
In any case, whether or not the Agreements have delivered value since the
October Agreement was entered into has no bearing on whether the steps
taken by Barclays to assess value prior to entering the Agreements were
reasonable. In contrast, the Authority considers it is relevant that there is
little evidence that the June Agreement had delivered value to Barclays by

the time that the October Agreement was entered into. In particular, the
Authority notes that any value that Barclays might have derived from the
June Agreement was at that time far lower than the fees it had been
required to pay to QH thereunder.

Approach to Waksman J’s judgment in the PCP case

32.
The Authority should not adopt a blanket approach of reliance on the findings in
Waksman J’s judgment in the PCP case. The issues Waksman J was being asked to
consider were different and he was not shown all of the evidence that is now available
to the Authority.

33.
Waksman J had to decide whether the commercial connection between the October
Agreement and the October capital raising meant that a Barclays senior manager
had made a deceitful representation during a conversation with the principal of PCP.
This was an oral representation upon which no legal advice was taken. Waksman J
did not have to decide whether the extent of the commercial connection meant that
the June Agreement or the October Agreement had to be disclosed under the Listing
Rules. The legal advice which was provided by Barclays’ internal and external
lawyers in relation to disclosure under the Listing Rules was not therefore something
which had to be brought to Waksman J’s attention, particularly as regards the June
Agreement. In contrast, the advice of Barclays’ internal and external lawyers is
central to the allegations made by the Authority.

34.
The Authority has not simply relied on the findings in Waksman J’s
judgment but has also had regard to the underlying evidence in reaching its
conclusions. However, it does consider that it is appropriate and reasonable
to have regard to, and place considerable weight on, Waksman J’s findings,
as they cover many of the facts and matters relevant to this case and were
reached following a full trial, including witness evidence, cross-examination
and lengthy submissions by Counsel.

35.
The Authority acknowledges that the issues that Waksman J had to consider
were different in certain respects, including that he did not have to consider
whether Barclays complied with its disclosure obligations under the Listing
Rules. However, he did have to consider the factual issue of the connection
between the Agreements and the capital raisings, which is a key issue in
this case. It is also apparent from his judgment that Waksman J was aware
of the legal advice provided to Barclays and took it into account to the extent
he deemed necessary to reach his conclusions. There is nothing to suggest
that Waksman J was unaware of any legal advice which might have changed
his conclusions regarding the connection between the Agreements and the
capital raisings.


The June Agreement and the June 2008 capital raising

No breach of LR 1.3.3R

36.
Barclays plc did not breach LR 1.3.3R in its disclosures in relation to the June capital
raising. Barclays plc’s disclosures were not misleading, false or deceptive, and did
not omit anything likely to affect the import of the information disclosed. In addition,
Barclays plc took reasonable care to ensure that its disclosures were not misleading,
false or deceptive and did not omit anything likely to affect the import of the
information disclosed.

37.
For the reasons set out in paragraphs 101 to 105 of this Notice, the
Authority considers that Barclays plc failed to take reasonable care to
ensure that the information contained in the announcement and prospectus
associated with the June capital raising was not misleading, false or
deceptive, and did not omit anything likely to affect its import, in breach of
LR 1.3.3R.

The disclosures were not misleading etc.

38.
The June Agreement was a binding legal agreement and was legally separate to the
capital raising. It was connected to the capital raising in the sense that it formed
part of the overall commercial deal struck with the Qatari entities. However, the
separateness of the June Agreement is clear from its terms. First, it was a standalone
agreement and it would not have terminated, had the Qatari entities divested from
Barclays plc. Secondly, the Qatari entities accepted that, if they failed to fulfil their
obligations under the June Agreement, Barclays would have had the option of
terminating the June Agreement and clawing back the money it had paid under the
June Agreement without impacting the Qatari entities’ shareholding in Barclays plc.
It was therefore not necessary to disclose the June Agreement.

39.
The level of fees payable to QH under the June Agreement was not large enough to
make it a material contract requiring that amount to be disclosed. This was
confirmed by Barclays’ internal and external lawyers in June 2008. In addition, the
evidence from institutional investors is that they would not have expected the level
of advisory fees under the June Agreement to have been disclosed and that they
regarded the level of those fees as immaterial. Further, the possibility of clawback
means that the fees under the June Agreement cannot properly be described as more
than doubling the payments to the Qatari entities for their participation in the June
capital raising, which supports the view that they were not material to investors.

40.
The market would not have expected the announcement or the prospectus published
in June 2008 to disclose information about the total advisory fees payable under the
June Agreement or about the way in which they had been negotiated and/or
calculated, even though the total amount of those fees was determined by reference
to the commercial demands made by the Qatari entities as part of agreeing to
subscribe to the June capital raising. It is not market practice in the UK to describe
the commercial negotiations that led to a particular price to be paid, or a particular
level of consideration to be agreed, for a transaction. Those matters are regarded as
commercially sensitive and confidential and it would be highly unusual for any details
about those negotiations to be included in public announcements and documents.

41.
The view of the market expert instructed by Barclays in relation to these proceedings
is that, if the fees under the June Agreement had been disclosed, they would not

have had a material impact on the assessment of the June capital raising. At that
time, the market, investors and shareholders were focussed on the collapse in the
financial markets and on the urgency for additional capital, and there was little
interest in the fee structure of the June capital raising or in the June Agreement.

42.
None of those involved in the capital raisings, or expert witnesses instructed by
Barclays in relation to these proceedings, have suggested that the non-disclosure of
additional details regarding the June Agreement was unreasonable. This is on the
proviso, which the Authority accepts, that the June Agreement was a legitimate
agreement for valuable services. This suggests, at the very least, that the
judgement call taken by Barclays at the time on what should be disclosed was not
unreasonable.

43.
The commercial connection between the June Agreement and the Qatari entities’
participation in the June capital raising was, in any case, made clear by the language
included in the announcement and prospectus published in June 2008. It was clear
from these documents that the June Agreement was entered into at the same time
as the subscription agreements and it was described in the context of the Qatari
entities becoming new investors and being part of the new relationship with the
Qatari entities resulting from that investment. In addition, the fact of the June
Agreement was disclosed under the heading “Reasons for the Firm Placing and the
Placing and Open Offer”. It was therefore clear to any reader that the agreement
was part of the overall commercial deal and that it was a sufficiently significant
agreement to warrant such prominent disclosure.

44.
The announcement in June 2008 did not set out any details of the terms of the capital
raising or any fees payable. If it was misleading for failing to disclose the fees under
the June Agreement then it would also be misleading for failing to disclose the 1.5%
commission, which cannot be right. Therefore, Barclays plc cannot have breached
LR 1.3.3R in respect of the contents of the announcement.

45.
Although the June Agreement was a legally separate contract, it was not
commercially or in practical terms free-standing since, as Barclays accepts,
it formed part of the commercial basis on which the Qatari entities agreed
to participate in the June capital raising. Had Barclays not agreed to enter
the June Agreement, the Qatari entities would not have participated in the
capital raising or would have required the additional fees in the capital
raising by other means. As such, the June Agreement was an intrinsic part
of the capital raising. Accordingly, to ensure that the information contained
in the published material associated with the June capital raising was not
misleading, false or deceptive, and did not omit matters likely to affect its
import, Barclays should have disclosed the fees payable under the June
Agreement, and their connection to the Qatari entities’ participation in the
June capital raising.

46.
The Authority considers that the evidence shows that it was never
envisaged that the June Agreement would be enforced. A Barclays senior
manager agreed in interview that they expected the payments to be made
under the Agreements irrespective of the delivery of services. Therefore,
the Authority considers it is accurate to say that disclosure of the fees
payable under the June Agreement would have more than doubled the
disclosed level of payments due to the Qatari entities in connection with

their participation in the June capital raising from £34.5 million to almost
£77 million. The Authority considers that this information would have been
relevant to shareholders, investors and the wider market, and so disagrees
with the view expressed by Barclays’ experts and others that non-disclosure
of this information was not unreasonable.

47.
The Authority does not consider it to be relevant whether or not the fees
payable under the June Agreement were in themselves sufficient to make it
a material contract requiring disclosure under the Authority’s Prospectus
Rules. The key point insofar as LR 1.3.3R is concerned is that the non-
disclosure of the fees payable under the June Agreement meant that the
information being disclosed in the prospectus regarding the terms on which
the Qatari entities were said to have agreed to subscribe was misleading,
false and/or deceptive and omitted matters likely to affect its import.

48.
In respect of Barclays plc’s claim that institutional investors “would not
have expected the level of advisory fees under the June Agreement to have
been disclosed and that they regarded the level of those fees as not
material”, the question whether information complies with LR 1.3.3R is not
answered by asking particular investors what they would or would not
expect. In addition, the statement is not accurate, as the evidence of an
institutional investor was that they would not have expected the June
Agreement to be disclosed “if it was for something separate from the capital
raising”, which was not the case.

49.
Barclays plc’s submission that it “is not market practice in the UK to
describe the commercial negotiations that led to a particular price to be
paid” is also not relevant to an assessment of whether it complied with LR
1.3.3R. The relationship between the June Agreement and the June capital
raising was not merely historical. Instead, the June Agreement, and the
fees payable to QH thereunder, were an essential precondition of the
investment, without which the Qatari entities would not have agreed to
subscribe.

50.
The Authority considers that the views of the market expert instructed by
Barclays as to whether or not disclosure of the omitted information would
have caused an investor to alter their investment decision are not relevant
to an assessment of whether or not there has been a breach of LR 1.3.3R.
Similarly, the Authority considers that it is also not relevant whether or not
investors expressed any interest in the level of fees under the June
Agreement; since the connection between the June Agreement and the June
capital raising was not disclosed, there would have been no reason for
investors to ask.

51.
The Authority does not agree that the commercial connection between the
June Agreement and the Qatari entities’ participation in the June capital
raising was made clear in the disclosed documents. Instead, the impression
given was that the June Agreement represented a commercially desirable
opportunity for Barclays that was distinct from the capital raising. In any
case, the Authority considers that the fees payable by Barclays under the
June Agreement was a material fact, the omission of which rendered the
information in the announcement and prospectus associated with the June

capital raising misleading, false and/or deceptive, and meant that it omitted
matters likely to affect its import.

52.
In assessing whether Barclays plc breached LR 1.3.3R the Authority
considers it appropriate to have regard to all the material that Barclays plc
published in relation to the capital raising (i.e. the announcement and the
prospectus). Neither the announcement nor the prospectus mentioned the
fees payable by Barclays to QH under the June Agreement, or their
connection to the June capital raising. The announcement was not intended
to be read in isolation from the prospectus as it contained details of the
share issue and made reference to the prospectus, stating “The Placing and
Open Offer will be on the terms and subject to the conditions set out in the
Prospectus”. Accordingly, a person reading the material published by
Barclays plc in relation to the capital raising would have been given the
misleading impression that the only fees to be paid to QH in connection with
its participation in the June capital raising were those mentioned in the
prospectus. The Authority therefore considers that, by failing to mention
the fees payable by Barclays under the June Agreement, and their
connection to the June capital raising, in either the prospectus or the
announcement, Barclays plc breached LR 1.3.3R.

Barclays’ internal lawyers’ knowledge and advice

53.
Barclays’ internal lawyers: (i) were aware of the fact that the June Agreement
emerged as a result of the Qatari entities’ requirements for additional value; (ii)
instructed Barclays’ external lawyers to provide advice on all aspects of disclosure
including the Listing Rules; and (iii) in reliance upon the advice they received from
Barclays’ external lawyers, advised that, provided that Barclays was satisfied that
the Qatari entities could offer business opportunities to the value of the amounts
payable thereunder, the June Agreement was a lawful agreement, and did not need
to be disclosed in the announcement and prospectus connected to the June capital
raising. This advice was reasonable and Barclays was entitled to rely on it, although
for commercial reasons Senior Manager A made the decision to disclose the fact of
the June Agreement.

54.
The Authority acknowledges that the evidence shows that Barclays’ internal
lawyers knew that the genesis of the June Agreement was the Qatari
entities’ requirement for additional fees, that it was a mechanism by which
the requirement would be met, that the payment of those fees was part of
the commercial bargain struck with the Qatari entities, pursuant to which
they would participate in the capital raising, and that the amount of the fees
payable under the June Agreement was calculated by reference to the
amount of the Qatari entities’ participation in the capital raising.

55.
Barclays’ internal lawyers, having such knowledge, advised that, as long as
Barclays was reasonably satisfied that the services to be provided under the
June Agreement fully justified the fees to be paid to QH thereunder, the
June Agreement was a permissible means of meeting QH’s fee requirements
and could be treated as separate and unconnected to the capital raising for
disclosure purposes. However, that does not mean it was reasonable for
Barclays plc not to disclose the fees to be paid to QH under the June
Agreement. Barclays’ internal lawyers gave their advice in reliance upon
the advice they received from Barclays’ external lawyers. However,

Barclays’ external lawyers were not fully informed of the connection
between the June Agreement and the capital raising. Further, the Authority
has not seen any evidence that Barclays’ internal lawyers considered what
effect the connection between the June Agreement and the capital raising
had on the specific disclosure requirements under LR 1.3.3R, and they did
not specifically instruct Barclays’ external lawyers to provide legal advice
regarding Barclays’ obligations under LR 1.3.3R, nor did Barclays’ external
lawyers do so. Therefore, in the Authority’s view, the knowledge of, and
advice given by, Barclays’ internal lawyers does not mean that Barclays plc
took reasonable care to comply with its obligations under LR 1.3.3R.

Knowledge of Barclays’ external lawyers

56.
Barclays’ external lawyers were fully aware, before the announcement and the
prospectus relating to the June capital raising were published, that the June
Agreement helped meet the Qatari entities’ commercial demands in connection with
the June capital raising and formed part of the basis upon which the Qatari entities
agreed to participate.

57.
Throughout the negotiations with the Qatari entities, everyone involved, including
Barclays’ external lawyers, knew that the amount payable under the June Agreement
was calculated by reference to the amount of the Qatari entities’ participation in the
capital raising. It was understood by Barclays at all times that this was not an issue,
as long as any such payment was “in exchange for additional value delivered and …
independently justifiable”.

58.
Barclays’ external lawyers were aware of: (a) the connection between the June
Agreement and the June capital raising; and (b) that the June Agreement was being
used to meet the Qatari entities’ requirement for additional fees. The evidence shows
that Barclays’ external lawyers were aware: (i) that since mid-May 2008, Barclays’
internal lawyers had been discussing with Barclays’ external lawyers possible
“sweeteners” to be offered to some anchor investors in addition to the placing
commissions; (ii) of the Qatari entities’ original requirements for 3.75%; (iii) of
Barclays’ refusal to meet those requirements by way of higher commissions; (iv)
that the June Agreement was the alternative solution identified within Barclays to fill
the value gap; and (v) that the amounts payable under the June Agreement were
calculated by reference to the Qatari entities’ original requirements and
corresponded to 1.75% of the maximum commitment of both QH and Challenger,
rounded up to include the equivalent of LIBOR interest on that sum.

59.
The evidence in support of Barclays’ external lawyers having this awareness includes
the written and oral evidence of Barclays’ internal lawyers, contemporaneous
documents recording the discussions which took place between Barclays and its
external lawyers, the fact that there would have been no reason for Barclays’ internal
lawyers not to provide the full facts to Barclays’ external lawyers, and the fact that
the contemporaneous documents support Barclays’ internal lawyers’ evidence and
undermine Barclays’ external lawyers’ evidence in interview with the Authority. It is
much more likely that in interview Barclays’ external lawyers failed to recollect
events that occurred more than eight years previously, than that they were unaware
at the time of these matters. In addition, a Barclays external lawyer told the SFO
that whilst they did not know if the Qatari entities would only subscribe if the June
Agreement was entered into, they did know that “the package was negotiated and

arrived at and included [the June Agreement]” and it was part of the deal struck with
the Qatari entities.

60.
The 16 June 2008 email sent on behalf of the Qatari entities to Barclays’ external
lawyers, which referred to the payment to the Qatari entities of “an additional fee of
1.75% of the maximum commitment”, was forwarded by Barclays’ external lawyers
to Barclays’ internal lawyers marked “Fyi”. Barclays’ external lawyers did not
question this reference to an additional fee, which was not hidden away in the email.

61.
On 17 June 2008, a Barclays internal lawyer emailed various individuals at Barclays,
copying in a Barclays external lawyer, and set out Barclays’ external lawyers’ advice
that the June Agreement did not need to be disclosed in circumstances which
included the fact that, if the Qatari entities wanted additional payments beyond 1.5%
commission, they would need to provide additional value. To any reasonable reader
it should have been obvious that the Qatari entities were looking for additional value
from their subscription.

62.
As mentioned above, the Authority considers that Barclays’ external
lawyers were not fully informed of the connection between the June
Agreement and the capital raising. This conclusion is supported by the
contemporaneous documentary evidence and by the interview evidence of
senior Barclays external lawyers, who stated that they were not aware at
the time that the June Agreement was a mechanism by which Barclays
would meet the Qatari entities’ requirement for additional fees.

63.
One of these senior Barclays external lawyers stated in interview that they
had “never understood that was the rationale” and that they had not been
told at the time about the Qatari entities’ requirement for additional fees or
that the fees under the June Agreement had been calculated by reference
to that requirement. They stated that they were not aware of the
connection between the two transactions, and that they did not understand
that the Qatari entities’ participation in the June capital raising was
contingent upon the fees payable under the June Agreement or that “if this
arrangement wasn’t entered into the Qataris would potentially walk away
from the investment”.

64.
Another senior Barclays external lawyer stated that they were generally
aware that investors, including the Qatari entities, wanted “more than the
bank was willing to pay”, but were not aware of the specifics of the Qatari
entities’ requirement, that the June Agreement was the means by which
that requirement would be met or that the fees payable under the June
Agreement had been calculated by reference to it.

65.
In respect of the 16 June 2008 email, a Barclays external lawyer who
received the email explained in interview that they did not realise that the
reference to the additional fee represented an additional requirement of the
Qatari entities. They stated that they considered anything to do with
commission to be a commercial point and so did not focus on this fee.
Another Barclays external lawyer stated that they assumed it was a
mistake, that it was a commercial point that they could not have commented
on, and that it appeared inconsistent with the fact that they had been told

that all of the Conditional Placees were going to receive the same
commission.

66.
The 17 June 2008 email from a Barclays internal lawyer which copied in a
Barclays external lawyer was the final email in a chain of emails. That email
did not mention that the Qatari entities accepted that they would receive
commission of 1.5% and that additional value must be provided for any
additional payment. Instead, this point was mentioned in the third email in
the chain, which was an email which was just sent internally within Barclays
and did not copy in Barclays’ external lawyers. The Authority therefore does
not consider that this email undermines Barclays’ external lawyers’
evidence that they were not aware of the connection between the June
capital raising and the June Agreement.

67.
Having regard to all the evidence before it, the Authority has concluded that
Barclays’ external lawyers were not fully informed, and that Barclays failed
to take reasonable care to ensure that they were fully informed, of the
connection between the June Agreement and the Qatari entities’
participation in the June capital raising. In addition to the interview
evidence of Barclays external lawyers mentioned above, there is no
evidence that Barclays’ external lawyers were provided with any document
which clearly and comprehensively stated the relevant facts.

68.
The fact that Barclays’ external lawyers might have been able to infer a
connection between the June Agreement and the capital raising, from being
copied into email communications or because of discussions about
“sweeteners” a month earlier, is not sufficient to undermine Barclays’
external lawyers’ interview evidence that they were not fully informed of
the connection. Further, it does not amount to Barclays taking reasonable
care to ensure its external lawyers were fully informed. Barclays cannot
reasonably contend that it acted reasonably because it relied on legal advice
in circumstances where it did not take adequate steps to ensure that the
lawyers were fully informed of the relevant facts that they needed to know
in order properly to provide that advice.

Advice from Barclays’ external lawyers

69.
Barclays’ external lawyers advised that: (i) the June Agreement was a lawful
arrangement, as long as Barclays was satisfied that it could receive valuable services
at least equal to the amounts payable under the June Agreement; and (ii) that whilst
Barclays wanted to disclose the June Agreement for commercial reasons, the
amounts payable under the June Agreement did not need to be disclosed. This
advice was based on assurances from Barclays’ commercial team that the services
to be received were genuine and that the payments to be made under the June
Agreement were expected to be justified by the benefits to be received by Barclays.
In giving this advice, Barclays’ external lawyers had regard to, amongst other things,
LR 1.3.3R, as was confirmed to the Authority by senior Barclays external lawyers.
Barclays’ external lawyers are experts on disclosure and the Listing Rules, gave
advice on the basis of their (correct) understanding of the facts and it was reasonable
for Barclays plc to rely upon that advice.

70.
There are a number of contemporaneous documents evidencing that Barclays’
external lawyers gave disclosure advice on the June Agreement, including emails

from Barclays’ external lawyers and emails summarising their advice which were
copied or forwarded to them. In addition, due to the fast-paced and highly-pressured
situation facing Barclays in June 2008, Barclays’ external lawyers often advised
orally, but that does not make such advice relatively informal. Had any of Barclays’
external lawyers disagreed with how their disclosure advice on the June Agreement
had been summarised, they would have replied and flagged any inaccuracies, but
there is no evidence that they did.

71.
The Authority acknowledges that Barclays’ external lawyers advised that
Barclays did not need to disclose the amounts payable under the June
Agreement providing that the value it could expect to receive from services
pursuant to the June Agreement fully justified the fees to be paid to QH.
However, as explained above, Barclays’ external lawyers gave informal
advice in circumstances where they had not been fully informed of the
connection between the June Agreement and the capital raising.

72.
Barclays’ external lawyers did not provide any written advice about the June
Agreement and the Authority considers it is reasonable to conclude that the
advice they gave was relatively informal in nature. The contemporaneous
evidence as to the involvement of Barclays’ external lawyers is largely
limited to some references in a Barclays’ internal lawyer’s emails and a
senior
Barclays
external
lawyer
being
copied
into
certain
email
communications.

73.
There is no evidence that Barclays’ external lawyers were specifically asked
to advise, or did advise, on LR 1.3.3R in relation to the June capital raising.
Whilst Barclays’ external lawyers may have given some thought to the
requirements of this rule, the advice they provided was premised on what
they had been told, which, as mentioned above, did not include the true
nature of the connection between the June Agreement and the capital
raising. Without such knowledge, Barclays’ external lawyers could not
properly advise on Barclays’ disclosure obligations.

Assessment of value of the June Agreement

74.
Barclays’ internal and external lawyers made clear that Barclays needed to satisfy
itself that it could derive value from the Qatari entities under the June Agreement
which justified the total amount of the fees payable to QH thereunder. Barclays plc
followed the legal advice it received. It made enquiries to assess the value of the
June Agreement and was satisfied that the Qatari entities could offer business
opportunities up to the value of the fees under the June Agreement.

75.
A Barclays senior manager took steps to ensure that their views about the
commercial value of the June Agreement were supported by others and that the
agreement was commercially sensible. On 13 June 2008, the Barclays senior
manager made enquiries with various Product Heads at Barclays to estimate the
value the Qatari entities could provide to Barclays. The Barclays senior manager
considered various products as part of their estimate, including loans, bonds, pre-
export finance and commodities, and co-investments. They noted down their
estimate, which totalled approximately £150 million. This confirmed that the June
Agreement was going to create value well in excess of the amount payable
thereunder.


76.
The Qatari entities could provide services of real value to Barclays, so there is no
reasonable basis to second-guess the judgement of the Barclays senior managers at
the time as to the value which could be achieved under the June Agreement. In his
judgment, Waksman J found that the Barclays senior manager referred to above was
“well placed” to assess the value in the June Agreement and that Barclays senior
managers believed in the value of the June Agreement.

77.
The value of QH’s commitment under the June Agreement to offer business
opportunities to Barclays to the value of the amounts payable under the June
Agreement was clear to everyone involved at Barclays, as well as to the Qatari
entities, who recognised the significant advantage of the Qatar Investment Authority
having a strategic relationship with a financial institution such as Barclays while it
underwent a rapid development to become one of the most active sovereign wealth
funds.

78.
The legal expert instructed by Barclays in relation to these proceedings does not
consider that Barclays’ internal lawyers could have been expected to require the
value of the potential services to be investigated and calculated through a detailed
analysis before the documents were published, or that Barclays’ commercial team
could have been expected to provide that detailed analysis, particularly given that
the services were not capable of a formulaic value assessment. Barclays’ internal
lawyers did not advise the commercial team that they needed to undertake any such
detailed assessment; this is because it would have been regarded as outside normal
practice and would not have been realistic given the circumstances.

79.
Barclays’ legal expert considers it was reasonable for Barclays plc, when deciding on
what to disclose, to rely on their understanding at that time that the June Agreement
could provide services to Barclays which justified the fees to be paid.

80.
The Authority considers that the steps taken by Barclays to satisfy itself that
the value it could expect to receive from services pursuant to the June
Agreement justified the fees to be paid to QH under the June Agreement
were inadequate.

81.
Although a Barclays senior manager talked to a “number of the product
chiefs at Barclays Capital”, as a result of which they formed the impression
that the Qatari entities could provide opportunities of sufficient value to
Barclays, this was an informal exercise undertaken before the terms of the
June Agreement were known and not a proper attempt at assessing the
value of the opportunities offered by the June Agreement.

82.
Barclays’ internal lawyers appreciated and emphasised that a proper
valuation assessment was required. On 16 June 2016, a Barclays internal
lawyer noted in an email to Barclays senior managers, among others, that
“we need demonstrably to be getting our money’s worth otherwise there is
a risk that the fees could be perceived as a disguised commission”.
However, the value assessment carried out by Barclays was not systematic
and there was no coherent effort at valuation. Barclays has not provided
the Authority with any details of any analysis performed before the June
Agreement was entered into and it appears that no breakdown or
calculation of the potential value of the services to be provided was ever
attempted. As Waksman J commented, “the documents do not appear to

have received much if any detailed consideration at the time in terms of
what particular services would be offered and how they could be valued at
£42m over 3 years”.

83.
There is also no evidence that Barclays considered not just income but the
profit (including consideration of costs that would be incurred) that needed
to be generated from the June Agreement to justify fees of £42 million, and
it appears there was no assessment of what additional value the June
Agreement provided on top of: (1) whatever opportunities Barclays would
in any event have had in the Middle East, especially given the relationships
developed between Barclays and the Qatari entities during the course of the
June capital raising; and (2) any additional benefit that would have accrued
from the fact that the Qatari entities were in any event subscribing
materially in Barclays’ shares and would therefore have an incentive as
shareholders to co-operate commercially with Barclays.

84.
In addition, the fees were not calculated following an assessment of the
value of the services that QH could provide but by reference to what QH
wanted in return for its investment in the June capital raising. When QH
asked for a significant increase in the fees on account of Challenger’s
participation in the capital raising, Barclays agreed without carrying out any
valuation assessment.

85.
The Authority therefore considers it is clear that Barclays did not follow the
advice given by its lawyers and that, contrary to Barclays’ legal expert’s
views, Barclays did not take reasonable care to satisfy itself that the value
it would obtain from the June Agreement justified the fees it was required
to pay to QH thereunder.

Knowledge of the Board and the Board Finance Committee

86.
The Board and the Board Finance Committee did not need to be informed in any
more detail regarding the background to the June Agreement than they were.
Although the evidence of a Board member is that it would have been preferable to
allow the Board an opportunity to consider the Barclays senior managers’ judgement
that Barclays could receive value at least equal to the amounts payable under the
June Agreement, such a preference does not support the Authority’s case that
Barclays lacked reasonable care in respect of its decision not to disclose certain
details of the June Agreement including those amounts. The Board member also
considered that the fee was not very material and there is no evidence that the Board
would not have agreed with the Barclays’ senior managers’ commercial judgement.

87.
The minutes of the Board meeting of 19 June 2008 were drafted by Barclays’ external
lawyers, who also tabled a draft of the June Agreement. Barclays’ external lawyers
were aware of the connection between the June Agreement and the Qatari entities’
investment, and the size of the fee. If Barclays’ external lawyers had thought that
more detail about the June Agreement should have been presented to the Board
Finance Committee and the Board including as to the fee being paid, they could have
included those details in the draft minutes. They did not, and Barclays was entitled
to rely on their involvement to ensure the correct level of detail was given to the
Board.


88.
The Board and the Board Finance Committee ought to have been fully
informed of the connection between the June Agreement and the June
capital raising, but were not. In particular, as Waksman J found, the Board
and the Board Finance Committee were not informed that an additional
1.75% fee had been agreed with QH or that the June Agreement was the
means by which it would be paid. They were also not informed of how
Barclays senior managers had satisfied themselves that Barclays could
receive value at least equal to the fees payable under the June Agreement.
A Board member’s subsequent view that the fee did not appear to be very
material and the possibility that the Board might have agreed with the
Barclays’ senior managers’ commercial judgement do not affect the fact
that the failure to inform the Board and the Board Finance Committee of
these matters meant that good process was not followed and the June
Agreement was not properly scrutinised by Barclays. This failure therefore
is a further indication that Barclays plc did not take reasonable care to
comply with its obligations under LR 1.3.3R.

89.
Barclays’ external lawyers were not fully informed of the connection
between the June Agreement and the June capital raising, and were not
aware that the fees payable to QH under the June Agreement were
calculated by reference to the Qatari entities’ maximum commitment in the
June capital raising. Therefore, the fact that Barclays’ external lawyers
drafted the minutes of the Board meeting of 19 June 2008 does not
undermine the Authority’s conclusion that Barclays plc failed to take
reasonable care to comply with its obligations under LR 1.3.3R.

Events between July and September 2008

Allocation of costs

90.
It is not surprising that, given the different business units which would benefit to
different degrees from the Agreements, there was more than one option about how
the fees could be booked. The Authority cannot infer from the ultimate decision to
allocate the cost of the June Agreement to Barclays Group that this was because it
was considered to be a cost incurred in connection with the June capital raising. To
the contrary, the evidence shows that the decision to allocate the cost to Barclays
Group was reasonable, unrelated to the capital raisings and consistent with Barclays’
intention to make the most of the Agreements in all its divisions during the course
of their term.

91.
As Barclays Group also covered the costs associated with the June capital
raising, the Authority considers it is reasonable to conclude that Barclays
Group covered the cost of the June Agreement because it was considered to
be a cost incurred in connection with the June capital raising and accounted
for as such.

New business opportunities

92.
QH soon started presenting new business opportunities to Barclays after the June
Agreement had been entered into. The June Agreement was recognised as one of
the driving forces behind Barclays’ relationship with Qatar at an offsite of Barclays
Investment Banking Investment Management (IBIM) Middle East, which took place
on 8 to 9 September 2008. Presentations at that offsite show that the June
Agreement was seen by Barclays as instrumental in IBIM’s plan to increase its yearly

income in the Middle East to over US $1 billion and that it was important for Barclays
to make the most of the agreement to develop its relationship with Qatar. These
presentations are indicative of the importance that Barclays was attributing to the
relationship with the Qatari entities and to the June Agreement itself.

93.
The Qatari entities also recognised their obligation to help Barclays under the June
Agreement. For example, Barclays was invited in July 2008 to bid for the financing
of a proposed investment of 500 million euros by Qatar in a utility company because
the Qatari entities were of the view that no deal should be done without inviting
Barclays to participate.

94.
The Authority considers that the evidence shows that, after the June
Agreement was entered into, its existence was largely ignored in Barclays’
subsequent efforts to develop its business in Qatar and the Middle East,
including in presentations relating to such business.

95.
The Authority does not agree that presentations given on 8 and 9 September
2008 show that the June Agreement was considered to be important and
successful within Barclays. Only one presentation mentioned the June
Agreement, and it did so only in passing and in the context of stating that
there would be renewed focus on Qatar, among other places, going forward.

Background to the October capital raising

Proposed extension to the June Agreement in early October 2008

96.
The October Agreement should not be seen in the context of the proposed extension
of the June Agreement in early October 2008. The October Agreement had its own
genesis. The proposed extension was just a draft agreement which was never fully
realised and not even raised with the Qatari entities.

97.
Comments made by individuals at Barclays regarding the attractiveness of entering
into such an extension did not relate to the propriety of such an arrangement, as the
persons concerned all understood the June Agreement to be proper. Instead, the
comments concerned whether an extension would work commercially.

98.
The narrative around the proposed extension shows that the lawyers were tasked
with finding a solution to provide additional value to the Qatari entities after the deal
structure changed and the original concept could not be pursued. The situation is
analogous to the October Agreement, in the sense that in the October capital raising
the proposal to pay a £200 million arrangement fee was abandoned following legal
advice and Barclays’ external lawyers identified a possible alternative solution to
enter into the October Agreement. However, Senior Manager A was not involved in
the proposed extension.

99.
In the Authority’s view, the proposed extension of the June Agreement in
late September and early October 2008 provides important context for
understanding the genesis and purpose of the October Agreement when it
emerged as part of the capital raising at the end of October 2008.

100. The Authority considers that comments made in relation to the
appropriateness of entering into an extension of the June Agreement in
early October 2008, such as “we can’t use a similar advisory arrangement

because after all, how much advice do we need?” show that the justification
for an extension was far from clear given the very short period of time that
had elapsed since the June Agreement. This is also apparent from the email
sent by a Barclays senior manager on 6 October 2008 which set out the
“benefits of the advisory agreement to date”. The limited benefits stated
appear to fall far short of justifying the first tranche of fees under the June
Agreement, amounting to £10.5 million, which had already been paid by
Barclays at that point.

101. The Authority does not consider that, in giving advice in respect of the
proposed extension of the June Agreement in early October 2008, this
demonstrates that Barclays’ external lawyers were aware of the connection
between the June Agreement and the June capital raising or that, later that
month, they must have been aware of the connection between the October
Agreement and the October capital raising. There is no contemporaneous
evidence of the information provided to Barclays’ external lawyers which
formed the basis of their advice. A senior Barclays external lawyer stated
in interview that they were not aware of any inter-conditionality between
the proposed extension of the June Agreement and the investment by the
Qatari entities. In the Authority’s view, whilst a Barclays external lawyer
gave advice on disclosure in early October 2008, their involvement was
limited and their advice was given without knowing of the link between the
proposed extension and the Qatari entities’ fee requirements.

Project Tinbac

102. The potential of the relationship with the Qatari entities was further confirmed on 12
October 2008, when Barclays was offered a deal which became known as Project
Tinbac. Project Tinbac was a very significant opportunity for Barclays. It was
estimated that, if Barclays won it, Barclays would make over $250 million of profit
in the first year. It was an opportunity under the June Agreement but was relevant
to the October Agreement as, if such an opportunity could arise within three months
of the June Agreement, it demonstrated the potential Barclays could achieve over
five years.

103. The size and significance of this transaction is reflected in the fact that the Board
was informed on the same day that “Barclays Capital looked likely to be appointed
to manage a very large oil price hedging contract for [QH] which had previously been
given to [another investment bank].”

104. Project Tinbac was a great example of the type and scale of opportunities which
Barclays could derive from an ongoing strategic relationship with the Qatari entities.
With the Qatar Investment Authority planning to invest in the oil sector for many
years, Project Tinbac confirmed that the value of the business opportunities the
Qatari entities could offer was much higher than the value of services QH had
committed to provide under the June Agreement. Strengthening the strategic
relationship with the Qatari entities would have helped Barclays achieve its plan to
generate US $1 billion per annum in the Middle East by the end of 2012. Barclays’
desire to strengthen the strategic relationship with the Qatari entities informed its
decision, a few weeks later, to extend the June Agreement and enter into the October
Agreement.


105. The fact that Project Tinbac did not materialise in 2008, which was due to a
significant fall in the oil price, should not be used to question the commercial
judgement of those involved at the time.

106. The Authority acknowledges that Project Tinbac was an opportunity which
might have arisen for Barclays as a result of the June Agreement. However,
any other such opportunity would also have arisen under the terms of the
June Agreement in the three years after it was signed, and so Project Tinbac
on its own did not justify an extension to the June Agreement so soon after
the June Agreement had been entered into. Further, Project Tinbac had not
been secured by Barclays at that point (and ultimately Barclays did not
secure it), so it was wholly speculative of Barclays to place value on the
possibility of obtaining future projects of similar scale.

107. The fact that Project Tinbac did not materialise demonstrates that, in
assessing whether the October Agreement would provide value which
would justify the fees to be paid to QH under it, Barclays needed to have
regard not only to the possible opportunities that could arise under the
October Agreement, but also to the likelihood of the opportunities being
realised. However, it does not appear that Barclays undertook any such
assessment.

The October Agreement and the October 2008 capital raising

Rationale for the October Agreement

108. The October Agreement was Barclays’ chance to secure the Qatari entities’
commitment to provide additional business opportunities to Barclays to a higher
value and for a longer term as compared to the June Agreement. The arrangement
also worked for the Qatari entities: offering business opportunities to Barclays would
strengthen the relationship with Barclays whilst costing almost nothing to the Qatari
entities, and in return the Qatari entities would receive value which, in addition to
the fees and commissions under the October capital raising, would get them closer
to the value they had asked for.

109. The Agreements were separate; they did not provide for completely overlapping
services and time periods. The October Agreement was an extension of the June
Agreement and incorporated some of its terms, but it did not merely repeat the scope
of the June Agreement. The October Agreement provided for QH’s obligation to
provide additional business opportunities on a broader global scale, compared to the
June Agreement which focussed on business generated in the Gulf region. The
October Agreement also provided a longer term, five years instead of three years.
Such a broader scope and the extended term suited Barclays’ objectives to secure
the Qatari entities’ commitment for a longer period of time and to a higher value: it
had become apparent that the Qatari entities were embarking on an ambitious
investment plan and the scale of the opportunities the Qatari entities could offer was
notably higher than £42 million, especially in light of Project Tinbac.

110. The October Agreement incorporated by reference the terms of the June Agreement
and therefore, if the Qatari entities did not offer business opportunities to the value
of the amounts payable under the October Agreement, Barclays could terminate it,
refuse to pay the balance and claim back any amounts which had been paid for which
there were no corresponding services of value.

111. The October Agreement arose out of the Qatari entities’ requirements for
value in the October capital raising and formed part of the basis on which
the Qatari entities agreed to participate in the October capital raising. The
October Agreement was therefore inextricably linked to the October capital
raising and the £280 million in fees payable to QH under the October
Agreement was clearly material in size. As such, even if Barclays genuinely
believed that the October Agreement would provide additional business
opportunities to Barclays beyond those arising from the June Agreement,
and even though the October Agreement was different in certain respects
to the June Agreement, the fees payable to QH under the October
Agreement, and their connection to the Qatari entities’ participation in the
October capital raising, needed to be disclosed in order for Barclays to
comply with its disclosure obligations under LR 1.3.3R.

No breach of LR 1.3.3R

112. Barclays plc did not breach LR 1.3.3R in October 2008, when it published the
announcement regarding the October capital raising, or in November 2008, when it
published the related warrants prospectus. Barclays plc’s disclosures were not
misleading, false or deceptive, and did not omit anything likely to affect the import
of the information disclosed. In addition, Barclays plc took reasonable care to ensure
that its disclosures were not misleading, false or deceptive and did not omit anything
likely to affect the import of the information disclosed.

113. For the reasons set out in paragraphs 101 to 104 and 106 of this Notice, the
Authority considers that Barclays plc failed to take reasonable care to
ensure that the information contained in the prospectus and announcement
that it published associated with the October capital raising was not
misleading, false or deceptive, and did not omit anything likely to affect its
import, in breach of LR 1.3.3R.

The disclosures were not misleading etc.

114. Barclays was not obliged to disclose the October Agreement. The prospectuses did
not even set out the overall return for the investors across the capital raising and
therefore it cannot be the case that they should have included information about any
broader commercial package agreed with the Qatari entities.

115. The October Agreement was not sufficiently large or unusual of itself to be required
to be disclosed as a significant contract in the November prospectuses or the
announcement, and the specific content requirements for the November
prospectuses did not in any event include a requirement to disclose material
contracts.

116. There is no requirement to disclose the specific details of (or fees payable under) all
agreements that are connected, in the broad sense, to a capital raising which is the
subject of an announcement. In any case, in the context of the October capital
raising, the fees under the October Agreement were not material.

117. Had the Qatari entities not performed their obligations, Barclays would have had the
option of terminating the October Agreement and clawing back the money it had
paid thereunder without impacting the Qatari entities’ shareholding in Barclays. It

therefore follows that the fees under the October Agreement cannot properly be
described as effectively tripling the payments to the Qatari entities for their
participation in the October capital raising.

118. There is no evidence that any market participants would have been impacted if the
October Agreement had been referred to in the announcement or prospectuses.
Investors interviewed by the Authority do not support its case, but instead said that
they would not have expected the fees payable under the October Agreement to
have been disclosed.

119. This is also the view of the market expert instructed by Barclays in relation to these
proceedings, who has explained that in the extreme market conditions prevailing in
October 2008, the disclosed fees paid to the anchor investors were not in and of
themselves a material factor in the assessment of the capital raising.

120. As mentioned above, the October Agreement formed part of the basis on
which the Qatari entities agreed to participate in the October capital raising.
This conclusion is supported by findings made by Waksman J in his
judgment in the PCP case. For example, he stated that the October
Agreement “was clearly designed as a mechanism to enable [the Qatari
entities] to obtain their blended entry price of 130p” and “It cannot be
questioned that without [the October Agreement] the [Qatari entities]
would not have done the deal. It was part of the price for their investment”.
The October Agreement was therefore an intrinsic part of the capital raising
and so the fees payable thereunder, and their connection to the Qatari
entities’ participation in the October capital raising, should have been
disclosed. The fact that the October Agreement was not even mentioned in
the published documents associated with the October capital raising meant
that they did not set out the materially complete commercial terms of the
October capital raising.

121. The fees payable under the October Agreement amounted to £280 million.
As with the June Agreement, the Authority considers that it was never
envisaged that the October Agreement would be enforced and that this is
supported by the interview evidence of a Barclays senior manager. It is
therefore accurate to say that disclosure of these fees would have more
than tripled the disclosed level of payments due to the Qatari entities in
connection with their participation in the October capital raising from £128
million to more than £408 million. The Authority considers that this level of
fees was clearly material and that they would have been relevant to
shareholders, investors and the wider market, particularly in October 2008
in circumstances where there were concerns about the high cost of the
October capital raising and the availability of capital from the UK
Government. Contrary to Barclays’ submissions, this conclusion is
supported by evidence regarding the market’s likely reaction and publicly
available information at the relevant time. For example, market analysts
were almost unanimous that the cost of the October capital raising was
extremely high and several analysts explicitly included the fees in their
assessments of the cost of the capital raising.

122. In considering whether Barclays plc complied with LR 1.3.3R, the Authority
does not consider it to be relevant whether or not the fees payable under

the October Agreement were large enough to constitute a “significant
contract” or that there was no specific requirement to disclose material
contracts in the prospectuses or the announcement, as LR 1.3.3R
supplements other rules.

123. In the Authority’s view, whether compliance with LR 1.3.3R required
disclosure of the £280 million fees payable under the October Agreement is
not assisted by the opinion of market experts. However, in any event, the
Authority does not agree with the views of the market expert instructed by
Barclays or with the way in which Barclays has characterised the evidence
of investors interviewed by the Authority.

124. The Authority therefore concludes that, by disclosing that the Qatari entities
had invested in MCNs, RCIs and warrants, and would receive “a commission
of 4 per cent” on the MCNs, “a commission of 2 per cent” on the RCIs, and
a “fee of £66 million for having arranged certain of the subscriptions”,
without also disclosing that QH would receive the benefit of an additional
£280 million under the October Agreement as part of the same commercial
deal, Barclays plc disclosed information that was misleading, false and/or
deceptive, and which omitted matters likely to affect its import.

Knowledge of Barclays’ external lawyers

125. Barclays’ external lawyers understood the genesis of the October Agreement,
including that it was part of the overall commercial deal with the Qatari entities and
formed part of the basis upon which the Qatari entities agreed to participate. This
conclusion is supported by evidence given by a senior Barclays external lawyer in
interview with the SFO, who explained that they were aware in October 2008 that
the Qatari entities would not have invested without the October Agreement and that
the October Agreement was considered by the Qatari entities to be part of their
return for the investment. In addition, a senior Barclays internal lawyer told the SFO
that Barclays’ external lawyers knew about the connection between the October
Agreement and the October capital raising.

126. On 23 October 2008, a meeting was held which was attended by Barclays’ internal
and external lawyers. At this meeting, various issues were raised, including that
section 97 of the Companies Act 1985 imposed a 10% cap on the commissions which
Barclays could offer the investors, and that probably the same cap also applied to an
arrangement fee of £200 million which a Barclays senior manager had proposed
should be paid to the Qatari entities to bridge the value gap. It was agreed that
Barclays would instruct a QC to advise on these and various other issues.

127. Barclays’ external lawyers drafted Instructions to Counsel which contained a
reference to a “co-operation agreement”. This is the earliest written reference to
the proposed agreement that would become the October Agreement. The
Instructions to Counsel were drafted at a time when Barclays’ external lawyers knew
that Barclays had entered into the June Agreement, and at a time when they knew
that there had previously been discussions to extend the June Agreement. The
Instructions to Counsel make clear that the October Agreement was part of the
proposed deal as they refer to the co-operation agreement as part of the “Proposal”.

128. On 24 October 2008, at a pre-meeting before the conference with the QC, there was
a discussion between Barclays and its external lawyers about the agreement that

would become the October Agreement. Barclays’ external lawyers’ notes of the
meeting make reference to a proposed advisory agreement and note the link
between the June Agreement and the October Agreement: “Advisory agreement –
already out there [therefore] no new co-operation agreement to be entered into
[therefore] an [unlinked] document”. This discussion further supports the contention
that Barclays’ external lawyers were close to the discussions regarding the October
Agreement.

129. The QC’s advice confirmed to Barclays’ internal and external lawyers that the co-
operation agreement could be lawfully used to bridge the value gap with the Qatari
entities’ requirements in a way which the arrangement fee could not.

130. Following the conference with the QC, Barclays met with its external lawyers. A
Barclays internal lawyer’s notes of the meeting include a reference to value being
paid to the Qatari entities and identify, after referring to various fees, the existence
of a value gap: “this only gives 140m to Q … Extra 110 must be found to deliver Q
250m”.

131. At a discussion following receipt of the QC’s advice, Barclays’ external lawyers
advised that the October Agreement did not need to be disclosed. Barclays’ external
lawyers gave this advice in the knowledge that the QC had recommended fulsome
disclosure. They must therefore have concluded, correctly, that the relevant
payments were not part of the “financial terms of the capital raising arrangements”
which the QC recommended should be fully disclosed. Barclays was entitled to rely
on Barclays’ external lawyers’ advice. Barclays’ external lawyers were aware of the
genesis of the October Agreement as a way to help Barclays meet the Qatari entities’
requirements and knew, or must have known, that the Qatari entities would see it
as part of the deal, yet they were content that, despite that genesis, disclosure of
the October Agreement was not required.

132. There was no discussion with the Qatari entities of an extension of the June
Agreement at this time. There is no evidence of any involvement of any Barclays
senior manager in putting forward the idea of a co-operation agreement. In the
circumstances, the only reasonable inference that can be drawn from the evidence
is that Barclays’ external lawyers, who were aware of the June Agreement and had
advised Barclays internal lawyers in early October 2008 about a possible extension
of the June Agreement, whilst preparing for the conference with the QC, discussed
and/or agreed with Barclays’ internal lawyers, or identified themselves, that an
extension to the June Agreement would be a possible, lawful alternative way to
provide the additional value required by the Qatari entities.

133. The Authority considers that the evidence shows that Barclays’ external
lawyers were not given complete and accurate information, and that
Barclays did not take reasonable care to ensure they were fully and
accurately informed, about the connection between the October Agreement
and the October capital raising. In particular, Barclays’ external lawyers
were not aware that the genesis of the October Agreement was QH’s
requirement for additional fees for participating in the capital raising, that
the Qatari entities would not participate in the capital raising if QH did not
receive these additional fees, that the October Agreement was connected to
the capital raising and was not a separate commercial transaction, and that

the fees payable under the October Agreement were calculated by reference
to the value required by QH.

134. The Authority does not agree that comments made by a Barclays external
lawyer in interview with the SFO demonstrate that they were aware of the
connection between the October Agreement and the Qatari entities’
participation in the October capital raising. In the Authority’s view, the
explanation given by the Barclays external lawyer to the SFO shows that
they understood that two separate agreements were being negotiated in
parallel with each other (i.e. the capital raising and the October
Agreement), and that if the Qatari entities did not get what they wanted in
respect of one of those agreements, they might not enter the other. That is
not the same as admitting that they knew there had been a value
requirement by the Qatari entities in respect of the capital raising and that
they understood that Barclays’ means of meeting that requirement was the
October Agreement. In fact, the Barclays’ external lawyer’s evidence in
interview with both the SFO and the Authority was that they were not aware
that the October Agreement was being used to meet a value requirement by
the Qatari entities in the capital raising.

135. The reference in the Instructions to Counsel to a co-operation agreement
does not show that Barclays’ external lawyers came up with, or were aware
of, the idea that it would be a suitable way of meeting the Qatari entities’
value requirements. The Instructions to Counsel did not refer to any fees
payable under the co-operation agreement or request advice on any
disclosure advice issues associated with it. They also did not refer to any
connection between the proposed agreement and the Qatari entities’
participation in the capital raising (about which Barclays’ external lawyers
were unaware). In addition, the fact that a Barclays senior internal lawyer
told a Barclays external lawyer, following receipt of the QC’s advice, that
Barclays intended to pay approximately £120 million in fees to the Qatari
entities via a separate and “not connected” commercial arrangement, and
that this would be “a commercial trans’n and not for the capital raising”,
supports the Authority’s view that Barclays’ external lawyers did not
originate the idea of the co-operation agreement as a device to replace an
arrangement fee.

136. The interview evidence of a senior Barclays external lawyer also does not
support such a conclusion. They stated that they understood that the
reference to a co-operation agreement reflected their understanding that
“there was an expectation there would be some sort of expanded advisory
relationship because [the June Agreement] had been successful, because
they were happy with it, and they wanted to consolidate the position with
the Qatari entities”. They were not aware that the October Agreement was
in response to a value requirement by the Qatari entities for an entry price
blended across the June and October capital raisings or more generally in
response to the Qatari entities’ fee requirements in the October capital
raising.

137. In respect of the Barclays internal lawyer’s note that “this only gives 140m
to Q … Extra 110 must be found to deliver Q 250m”, there are no such
references in the notes of the Barclays external lawyer who attended that

meeting. There is also no contemporaneous evidence that Barclays’
external
lawyers
were
informed
about
the
Qatari
entities’
value
requirement before this meeting on 24 October 2008. The Authority
therefore considers it most likely that the Barclays internal lawyer’s notes
do not reflect discussions about these particular points during the meeting
and that they are instead ‘notes to self’ recording their own thoughts during
the meeting, informed by their understanding of the Qatari entities’ value
requirements.

Advice from Barclays’ external lawyers

138. Barclays took reasonable care by instructing Barclays’ external lawyers to advise on
the October capital raising, who in doing so had regard to LR 1.3.3R.

139. Barclays’ external lawyers, in the knowledge of the genesis of the October Agreement
and its commercial connection with the October capital raising, advised that Barclays
was not required to disclose the October Agreement. This advice was reasonable.
As a senior Barclays external lawyer explained in interview with the Authority, it was
not necessary for the October Agreement to be disclosed because it would have been
immaterial to investors whether the Qatari entities would have participated in the
capital raising with or without the October Agreement.

140. In any event, Barclays acted reasonably in following Barclays’ external lawyers’
advice, as it was entitled to rely upon their expertise.

141. No one at Barclays had any reason to question the reasonableness of the advice it
received from its external lawyers in relation to the October Agreement, which was
consistent with the advice Barclays’ external lawyers had given in June 2008 in
relation to the June Agreement and earlier in October 2008 in relation to the
proposed extension to the June Agreement that did not take place.

142. The Authority considers that the evidence does not show that Barclays
sought advice from Barclays’ external lawyers specifically in respect of its
obligations under LR 1.3.3R, and that it does not show that Barclays’
external lawyers gave advice regarding those obligations. A general
instruction of Barclays’ external lawyers was not sufficient to satisfy the
requirements of reasonable care. Barclays should have considered for itself
the specific obligations in question and, in seeking external advice, should
have requested advice specific to those obligations. However, Barclays did
neither.

143. The evidence seen by the Authority indicates that legal advice about
disclosure of the October Agreement was sought from Barclays’ external
lawyers only in passing in the margins of another meeting on 24 October
2008 and expressly on the basis that the October Agreement had arisen
“quite separately and not connected” with the capital raising and was “a
commercial arrangement and not for the capital raising”, which was not the
case.

144. After the discussions between Barclays’ internal and external lawyers
following receipt of the QC’s advice, no further legal advice was obtained in
relation to the October Agreement and its disclosure. Neither Barclays’
internal lawyers nor its external lawyers were involved with the drafting of

the October Agreement, which was left to a lawyer from Barclays Capital
who had not been involved in the drafting of the June Agreement and had
no knowledge of discussions around the Qatari entities’ requirement for
additional value in the October capital raising.

145. The reference to the absence of an equity prospectus by a Barclays external
lawyer when commenting, following the QC’s advice, that disclosure was
not required, suggests that disclosure was being viewed through the prism
of the Prospectus Rules and not the broader standard imposed by the Listing
Rules. No meaningful advice on whether the October Agreement ought to
be disclosed in accordance with LR 1.3.3R or LR 13.3.1R(3) was provided.

146. In addition, as mentioned above, Barclays’ external lawyers were not given
complete and accurate information, and were not fully and accurately
informed, of the connection between the October Agreement and the
October capital raising.

147. As a result, the Authority disagrees that, by instructing external lawyers,
Barclays took reasonable care to ensure that it complied with its obligations
under LR 1.3.3R. The comment by a Barclays external lawyer in interview
that disclosure of the October Agreement might not have been necessary
does not assist Barclays as it does not demonstrate that Barclays took
reasonable care. Further, Barclays did not follow Barclays’ external
lawyers’ advice as it did not take reasonable care to ensure that the value
it could expect to receive from services pursuant to the October Agreement
fully justified the fees to be paid to QH thereunder.

Assessment of value of the October Agreement

148. Before entering into the October Agreement and before the announcement relating
to the October capital raising was published, Barclays took adequate steps to assess
the value which it could receive under the October Agreement. Having satisfied itself
as to the full value of the October Agreement, it was reasonable for Barclays to rely
on the legal advice received as to the lawfulness of the October Agreement and
whether it needed to be disclosed.

149. Senior Manager A understood that, before agreeing any payments under the October
Agreement, they had to assess the value of this extended relationship with the Qatari
entities against the value they were asking for. Senior Manager A therefore assessed
whether Barclays would get value from the October Agreement and was satisfied
that the contract was of value to Barclays:

(a)
Senior Manager A understood that the June Agreement had been assisting
Barclays in successfully cultivating business in Qatar.

(b)
In considering the potential value of the October Agreement, Senior Manager
A took into consideration the additional opportunities which the October
Agreement could provide over and above the June Agreement. These
opportunities included emerging markets, global (non-Gold) commodities,
global infrastructure, global (non-Gulf) oil and gas and other business referrals,
over a five-year term. Senior Manager A did not know, and could not be
expected to know, at the time they were undertaking their assessment,

precisely which opportunities would be referred to Barclays under the October
Agreement.

(c)
At the time of Senior Manager A’s assessment Barclays had been working on
Project Tinbac, which was a highly lucrative business opportunity that had been
introduced to Barclays by the Qatari entities, and which had an estimated
income of US $250 million in the first year. Senior Manager A’s value judgement
at the time was that if, over the course of five years, the Qatari entities gave
Barclays access to just two deals of the size of Project Tinbac then the income
from the October Agreement would exceed the advisory fees by a large margin.
Senior Manager A also expected that the opportunities offered under the
October Agreement would enable Barclays to cement a lasting relationship, as
they did. Consistent with Barclays’ position, in the PCP judgment, Waksman J
agreed that Project Tinbac was relevant to Barclays’ assessment of the value
of the October Agreement.

(d)
Senior Manager A considered that investing more money in a commercial
relationship with the Qatari entities had the potential to return value to Barclays
for many years to come.

(e)
Senior Manager A was satisfied that the October Agreement was valuable to
Barclays because they considered that the bank could generate more than £50-
60 million a year from the Qatari entities under the October Agreement, and
therefore they were willing to pay £280 million (i.e. £56 million a year).
Therefore, at the time of entering into the October Agreement, Senior Manager
A’s assessment was that the agreement would provide Barclays with value.

150. Senior Manager A did not consider that there was a mathematical way of arriving at
a precise value to be placed on the October Agreement, and there was no
requirement for Senior Manager A to follow any specific process or some type of
systematic valuation exercise. The question Senior Manager A had to consider was
whether the October Agreement was an agreement that Barclays could get value
from. They decided it was and that was a decision they were entitled to make.

151. The legal expert instructed by Barclays in relation to these proceedings does not
consider that Barclays’ internal lawyers could have been expected to require
Barclays’ commercial team to undertake a detailed analysis of the value of the
potential services before the announcement and prospectuses were published, or
that Barclays’ commercial team could have been expected to provide that detailed
analysis, particularly given that the services were not capable of a formulaic value
assessment. That would have been regarded as outside normal practice and would
not have been realistic given the circumstances.

152. The Authority considers that neither Senior Manager A nor Barclays took
adequate steps to assess the value which Barclays could receive under the
October Agreement.

153. The £280 million fees payable to QH under the October Agreement were
approved by Senior Manager A on 30 October 2008, the day before the
October Agreement was signed, after they made a rapid and informal
judgement, which they themselves described as a “commercial bet”. They
did this after the Qatari entities had made a late requirement for a

significant increase in the fees from £185 million to £280 million. This was
clearly not a systematic exercise sufficient to enable Barclays to satisfy
itself on the relevant point. The question was not whether it was a deal
worthy of a “commercial bet”, but whether, in the context of the legal advice
obtained, it was a contract from which Barclays could be satisfied that it
would receive value at least equivalent to what was to be paid, with
potential penal consequences if it could not. There is no record of this
assessment or of the assumptions used in the valuation. There is also no
evidence that the potential benefits from the October Agreement were
considered distinct from the existing relationship deal-flow and the deals
the June Agreement could bring in, or that a calculation of the profit
(considering the costs that would be incurred) that needed to be generated
was carried out. Therefore, Senior Manager A and Barclays did not take
reasonable steps in making the assessment.

154. Although it appears that there was an increase in the number of
transactions discussed between Barclays and the Qatar Investment
Authority between June 2008 and October 2008, no specific analysis of the
performance of the June Agreement was carried out and there is no
evidence that any value was actually provided under the June Agreement
during this period. The amount of revenue received by Barclays from the
Qatari entities in the calendar year 2008, including the period before the
June Agreement was entered into, totalled approximately £3 million, far
less than the fees of £21 million which Barclays was required to pay to QH
by the time the October Agreement was entered into. Further, it is unclear
how much, if any, of this revenue was paid to Barclays pursuant to
opportunities which arose as a result of the Agreements. Whatever the
amount, as Waksman J found, it is “very difficult” to see how the October
Agreement could state that the June Agreement was a “great success”,
because “it had not gained any actual benefit in terms of completed deals”.

155. Although Barclays plc submits that Project Tinbac influenced and justified
the decision to enter into the October Agreement, the October Agreement
did not commit the Qatari entities to going through with the deal or even to
appointing Barclays, if the deal was to happen. In addition, in respect of
Barclays plc’s comment that two further projects of the size of Project
Tinbac could repay the October Agreement over five years, the Authority
notes that Project Tinbac was described in terms which made it clear that it
was an exceptional deal, which raises questions over whether obtaining two
similarly sized projects in the lifetime of the October Agreement was a
legitimate expectation. Further, if Project Tinbac could be obtained without
the October Agreement, it is not apparent why the October Agreement was
necessary to secure another such deal.

156. In respect of Senior Manager A’s comment that they considered that
Barclays could generate more than £50-60 million a year from the October
Agreement, there is no evidence that they assessed the profit (taking into
account the related costs that would be incurred) that needed to be
generated to justify the fees, which was far higher than the revenue figures
of £56 million a year and £280 million over five years which Barclays plc
submits Senior Manager A was satisfied could be generated. According to
figures provided by Barclays to the Authority, Barclays Capital needed to

generate total revenue of £431 million, or £86.2 million per year for five
years, to cover the cost base of £280 million.

157. Given the large sums involved and in light of the legal advice obtained, it
was unreasonable for Barclays not to have directed some of its extensive
analytical resources to consider in an evidence-based way whether the
October Agreement would provide value at least equivalent to what was to
be paid, even in the context of the financial crisis. Barclays plc therefore did
not take reasonable steps to ensure that value would be received for the
October Agreement or to ensure that the announcement and warrants
prospectus complied with LR 1.3.3R.

Knowledge of the Board and the Board Finance Committee

158. Although a draft of the October Agreement was not formally tabled at a Board
meeting or recorded in the minutes as approved by the Board, the intention to enter
into the October Agreement was mentioned to the Board on 26 October 2008 at a
meeting attended by senior Barclays internal lawyers.

159. Whilst there is no evidence that the Board was specifically asked to approve
payments of £280 million under the October Agreement, at its meeting on 26 October
2008 the Board was prepared to pay a nine-figure amount to the Qatari entities
under a further agreement. The Board discussed payments to the Qatari entities in
the order of £250 million, consisting of (i) £135 million for commissions for the
instruments issued in the October capital raising and for an arrangement fee; and
(ii) £115 million for “co-operative actions, an unconnected form of compensation”,
i.e. the October Agreement. The Board understood that the strategic relationship
with the Qatar entities could be extremely valuable. Project Tinbac was cited as an
example of the “enormous” opportunities which could derive from the co-operation
with the Qatari entities. The Board would also have been aware from discussions on
22 October 2008 that the proposed October Agreement was in response to the Qatari
entities requiring additional value in return for their investment and would have
realised that, if the additional value sought was not achieved, the Qatari entities
might not invest.

160. The relevant decisions about what information should be provided in
relation to the October capital raising were to be taken by the Board or the
Board Finance Committee to whom authority had been formally delegated,
so the Board and/or the Board Finance Committee needed to be fully
informed about the true nature of the October Agreement. However, there
is no evidence to suggest that either the Board or the Board Finance
Committee was fully informed of the relevant facts in relation to the October
Agreement. In particular, they were not aware of the £280 million fee or
how it was calculated.

161. In addition, the evidence of the non-executive director who, together with
Senior Manager A, was given authority by the Board Finance Committee to
finalise all arrangements in connection with the October capital raising, is
that the non-executive director had not seen and was not aware of the
October Agreement at the time of the October capital raising. The non-
executive director stated that they did “not know how [the £280 million]
fee was calculated, or when it was agreed with the Qataris, or who agreed
it for the Qataris or who agreed the fee for Barclays”.

162. Therefore, although the Board was aware of the intention to enter into the
October Agreement, and although the Board agreed on 26 October 2008 to
pay a nine-figure amount to the Qatari entities under a further agreement,
Barclays’ failure to ensure that the Board and/or the Board Finance
Committee was aware of all material facts in relation to the October
Agreement is a further reason for concluding that Barclays plc did not take
reasonable care to comply with its obligations under LR 1.3.3R.

No breach of LR 13.3.1R(3)

163. Barclays did not breach LR 13.3.1R(3). In assessing whether there was a breach of
LR 13.3.1R(3), it is necessary to consider whether the information that was not
disclosed in the circular issued in November 2008 was necessary to allow Barclays
plc’s shareholders to make a properly informed decision as to the voting action
required of them. The circular related to votes on shareholder resolutions. By that
time the October Agreement had already been entered into and it was effective, with
the Qatari entities obliged to provide services to Barclays and Barclays obliged to
pay for those services. It therefore cannot have been relevant to the decisions
required of the shareholders, which focussed on the disapplication of pre-emption
rights and the terms of the instruments to be issued and sold in that context against
the alternate backdrop of voting against the capital raising and accepting a ‘bail out’
from the Government, and who were not requested to approve the fees for the
October capital raising.

164. In any event, the Authority has not produced any evidence to support the contention
that information about the October Agreement would have been relevant to the
relevant voting decisions. In fact, the evidence gathered by the Authority from
institutional investors indicates that it would not have been relevant. This is
consistent with the opinion of the market expert instructed by Barclays in relation to
these proceedings. In the circumstances that existed at that time, information about
fees that Barclays had already committed to provide under the October Agreement
would not have been necessary for shareholders to make a properly informed
decision as to the voting action required of them on the relevant shareholders’
resolutions.

165. The circular issued by Barclays plc on 7 November 2008 sought the approval
of Barclays plc’s shareholders for the October capital raising. It did not
mention the October Agreement or anything about it. LR 13.3.1R(3)
provides that such a circular must “contain all information necessary to
allow the security holders to make a properly informed decision”. The fees
payable to QH under the October Agreement, which amounted to £280
million, and their connection to the October capital raising, was clearly
information that would have been relevant to Barclays plc’s shareholders
when voting on the October capital raising, given that, had they been
disclosed, they would have more than tripled the disclosed level of
payments to the Qatari entities in connection with their participation in the
October capital raising from £128 million to more than £408 million. This
would have been relevant to the shareholders, who would not have been
expected to approve Barclays’ intended course of action without knowing
what the investors were going to receive in return, and who were also
aware of the alternative option of seeking capital from the UK Government.

Accordingly, Barclays plc breached LR 13.3.1R(3) by failing to include such
information in the shareholder circular.

166. The circular included information about the other fees and commissions that
were being paid in relation to the October capital raising. Therefore, if it
was thought necessary to disclose such information, Barclays plc cannot
reasonably contend that it was not necessary for shareholders to be aware
of the fees payable under the October Agreement which were connected to
the October capital raising.

167. The Authority considers that the evidence of institutional investors supports
the view that information about the fees payable to QH under the October
Agreement and their connection to the capital raising was necessary for
their respective decisions to have been “properly informed”.

No breach of Listing Principle 3

168. The Authority is wrong to allege that Barclays plc lacked integrity in relation to the
October Agreement. Barclays took, and followed, legal advice throughout the
October capital raising. That legal advice came from internal and external lawyers.
The advice was that it was not necessary to disclose the October Agreement. At all
times, Barclays followed that advice.

169. It is accepted that the amount payable under the October Agreement as originally
envisaged on 24 October 2008 (£120 million) was subsequently increased to £280
million with the agreement of Senior Manager A. However, it is without merit to
suggest that the steps taken by Senior Manager A in assessing value demonstrate
that they were acting with a lack of integrity. As explained at paragraph 149 above,
Senior Manager A undertook an assessment of the value to Barclays of the October
Agreement and concluded that the agreement did offer value. That was an
assessment Senior Manager A was entitled to make and in doing so they did not act
recklessly. Even if there were reasonable grounds to complain about how Senior
Manager A approached their valuation assessment, that would not support the
contention that they acted with a lack of integrity, especially in circumstances where
they had to make decisions at pace and under pressure.

170. The legal expert instructed by Barclays in relation to these proceedings does not
consider that Senior Manager A acted recklessly and with a lack of integrity. In their
opinion, the evidence shows that Senior Manager A, at the time the October
Agreement was entered into, believed that valuable services would be received by
Barclays under the October Agreement which could justify the fees payable under it.
The nature of the services meant that they were not capable of a formulaic value
assessment and it was not reckless for Senior Manager A to rely on their own
understanding of the value of the relationship and of the services to be provided
under the October Agreement, and on the view of the relevant internal commercial
team as to whether the October Agreement would provide valuable consideration to
Barclays that justified the fees payable under it. Neither Barclays’ internal lawyers
nor its external lawyers advised Senior Manager A that such a detailed assessment
needed to be undertaken in order to justify the disclosure treatment of the October
Agreement.

171. A lack of integrity does not automatically follow from a finding of recklessness. To
establish a lack of integrity, the Authority must establish a failure to adhere to ethical

standards. In this case, the Authority must show that an individual whose state of
mind can be attributed to Barclays plc failed to adhere to ordinary ethical standards
in circumstances where those standards were clear.

172. The Authority has concluded that Barclays plc acted recklessly, and with a
lack of integrity, in relation to the October capital raising, because of the
actions of Senior Manager A. Senior Manager A was involved in the
negotiation of the October Agreement and agreed the late increase in the
fees payable under it to £280 million. They were aware of the legal advice
that Barclays had received regarding disclosure of the October Agreement.
They also signed a Letter of Responsibility which stated that they accepted
responsibility for the information contained in the warrants prospectus and
that they confirmed “that to the best of [their] knowledge, having taken all
reasonable care to ensure that such is the case, the information contained
in it is in accordance with the facts and does not omit anything likely to
affect the import of such information”.

173. Senior Manager A was aware that Barclays had received legal advice that it
needed to take reasonable care to ensure that the value it expected to
receive from services pursuant to the October Agreement fully justified the
£280 million in fees that it was required to pay to QH under it. They must
also have been aware that, if it did not do so, this would give rise to the
clear risk that the omission of any reference to the October Agreement, the
fees to be paid under the October Agreement and their connection to the
October capital raising from the announcement and the prospectuses that
were associated with the October capital raising, would render the
information contained in those documents misleading, false and/or
deceptive and/or would mean that it omitted matters likely to affect the
import of that information. However, notwithstanding their awareness of
that risk, Senior Manager A: (i) failed to take adequate steps to ensure that
the value Barclays expected to receive from services pursuant to the
October Agreement did fully justify the fees that it was required to pay to
QH under it; and (ii) unreasonably approved the announcement, the
warrants prospectus and the circular in circumstances where they were
aware that Barclays had not carried out an adequate valuation assessment.
In giving such approval, Senior Manager A, and therefore Barclays plc, acted
recklessly and with a lack of integrity.

174. The failure to carry out the valuation assessment properly meant that
Barclays did not follow the legal advice given to it. The fact that Senior
Manager A was acting at pace and under pressure, and was not advised to
make a detailed assessment, does not excuse their conduct; Senior Manager
A did not make a coherent attempt at valuation and instead made a rapid
and informal judgement which they later described to the Authority as a
“commercial bet”. There was certainly no reasoned basis for them to
conclude that any value received after the October Agreement was entered
into would be referable to it rather than to the still-extant June Agreement.
By approving the material published by Barclays plc in circumstances where
they must have been aware that an adequate valuation assessment had not
been carried out, Senior Manager A, and therefore Barclays plc, acted
recklessly. The Authority therefore disagrees with the views of Barclays’
legal expert.

175. The Authority agrees that a lack of integrity does not automatically follow
from a finding of recklessness. However, in all of the circumstances of this
case,
including
Senior
Manager
A’s
awareness
of
the
potential
consequences of not carrying out a proper valuation assessment, the
Authority is satisfied that Senior Manager A’s reckless behaviour amounted
to a lack of integrity.

Attribution

176. If Senior Manager A acted recklessly (which is denied), their conduct in that regard
is not attributable to Barclays plc.

177. To attribute Senior Manager A’s state of mind to Barclays plc, the Authority must
demonstrate that Senior Manager A represented the directing mind and will of
Barclays plc for the purpose of the activity in question, i.e. that Senior Manager A
was acting as Barclays plc rather than for Barclays plc. The activity in question here
is the omissions from the announcement, the warrants prospectus and the circular
in relation to the October capital raising.

178. There is no evidence that Senior Manager A was Barclays plc’s directing mind and
will for the purpose of the fees agreed and disclosures made by Barclays plc in
association with the October capital raising.

179. The evidence shows that, on the facts of this case, only the Board had authority to
agree such key terms of the October capital raising as the fees to be paid to the
Qatari entities in return for their participation, and that the Board’s decisions dictated
the disclosure Barclays would make about those fees.

180. The evidence shows that the Board properly exercised that authority, and the terms
it agreed in that capacity were then reflected in the resulting documentation.
Therefore, in the circumstances of this case, the Board was the true directing mind
and will of Barclays plc for the purposes of the alleged omissions in relation to the
October capital raising.

181. Insofar as the Board had the power to delegate authority to finalise the material
terms of the October capital raising and the accompanying documentation, such
delegation could only extend as far as a committee of the Board. In respect of the
October capital raising, such authority was delegated to the Board Finance
Committee on 27 October 2008, which the following day delegated such authority to
a sub-committee consisting of a non-executive director and Senior Manager A, acting
jointly. According to the non-executive director, the scope of the delegation of
authority over the material terms of the capital raising was in practice limited; any
significant decision about, or amendment to, the fees to be paid to the Qatari entities
for their participation in the capital raising were of such obvious significance that
they would have to be approved by the Board. The final terms of the capital raising
and the disclosures made about them merely reflected the decisions made by the
Board. In any case, if they did not do so, as long as the Board acted with integrity
then Barclays plc should not be found to have breached Listing Principle 3.

182. There is no evidence that the Board, as the directing mind and will of Barclays plc,
was reckless or in any event lacked integrity. Senior Barclays internal lawyers
attended Board meetings at which the October capital raising was considered but did

not flag to the Board the genesis of the October Agreement, its importance to the
Qatari entities’ subscription, the way in which the amount payable thereunder was
calculated, the timing of the October Agreement and the terms thereto, or the level
of discussion with the Qatari entities as to the nature and scope of the services or
the analysis conducted within Barclays in this respect.

183. It is clear that, in accordance with the decision in Tesco v Nattrass [1972] AC 153,
Senior Manager A was not the directing mind and will of Barclays plc. At no point
was authority delegated to Senior Manager A acting alone and so they had no actual
or de facto ability to agree different terms for the October capital raising.

184. In the circumstances, it is not necessary or appropriate for the Authority to fashion
a special rule of attribution in accordance with the principles in Meridian Global Funds
Management v Securities Commission [1995] AC 500.

185. If matters were omitted from the relevant documents, Barclays plc can be held
accountable and in breach of the Listing Rules. Therefore, if Senior Manager A’s
recklessness is not attributed to Barclays plc, this is not a case where the Listing
Rules regime will be subverted or emasculated or where there would be an unjust
result, and so there is no need to look for a special rule of attribution. This is
supported by the fact that it was open to the Authority to take action against Senior
Manager A in respect of their alleged recklessness.

186. The Authority’s attempt to fashion a special rule of attribution is confusing and
unworkable. If culpability for a breach of LP 3 extended to those individuals directly
involved in and, for practical purposes, responsible for what should be said (in this
case, in relation to the October capital raising and the October Agreement), there is
a risk that a rule of attribution would be established that is far broader than it needs
to be, or should be. Whilst it is accepted that if people involved in, and with
responsibility for aspects of, capital raisings and the announcements associated with
them, failed in their roles, that could in principle give rise to an issuer being liable
under the Listing Rules, that would not be sufficient to give rise to a breach of LP 3.

187. The circumstances surrounding the capital raisings and whose state of mind should
be attributed to Barclays plc has already been the subject of two judgments. First,
Jay J in the Crown Court dismissed charges brought by the SFO against Barclays plc,
on the basis that certain of its senior managers who were alleged to have committed
offences did not constitute Barclays plc’s directing mind and will for the purpose of
the issuance of the prospectuses and subscription agreements associated with the
capital raisings. Secondly, Davis LJ in the High Court concurred with Jay J’s reasoning
in dismissing the application by the SFO for a voluntary bill of indictment. The same
reasoning applies here.

188. Barclays plc recognises that the Authority is considering who is the directing mind
and will of Barclays plc in the context of the Listing Principles, a regulatory provision,
albeit one that is akin to a criminal provision in that it results in the imposition of a
penalty and requires a finding of recklessness and therefore mens rea. There is no
good reason to depart from these judgments simply because the criminal courts
considered the same conduct in the context of the Fraud Act 2006. It would be
perverse for the Authority to conclude, contrary to the findings of the Crown Court
and the High Court, that attribution to Barclays plc should apply in such
circumstances.

189. If Senior Manager A’s conduct was attributed to Barclays plc, it would mean that with
respect to the same conduct involving the same individuals and the same corporate
governance, the bank could act with two different legal minds. Parliament’s intention
and the statutory purposes would have to be overwhelmingly clear to create a
situation where, for the same activity, there were two different directing minds; but
there is no such overwhelming rationale when regard is had to the Listing Rules.

190. For the reasons set out below, the Authority considers it is appropriate and
reasonable for Senior Manager A’s reckless conduct to be attributed to
Barclays plc for the purposes of considering whether Barclays plc complied
with Listing Principle 3.

191. The Authority considers that it cannot be the case that Listing Principle 3
can only be breached if a firm’s entire board acts without integrity. It would
mean that Listing Principle 3 had little value in practical terms and would
mean that the board had an incentive to pay little attention to what the
firm’s executives were doing.

192. In the Authority’s view, in considering whether Barclays plc complied with
Listing Principle 3, it is not necessary to determine whether Senior Manager
A was the firm’s “directing mind and will”. Instead, the Authority considers
that, in a regulatory case such as this, it is necessary to fashion a “special
rule of attribution”, having regard to the purpose of the relevant rule (i.e.
Listing Principle 3) and the context in which the question of attribution
arises, which requires an analysis of the facts of the case.

193. Listing Principle 3 imposes a positive duty on a firm to act with integrity, in
the context of the firm’s dealings “towards the holders and potential holders
of its listed securities”. Those dealings must be conducted by individuals
on behalf of the firm. Therefore, the firm acts with integrity towards the
holders and potential holders of its listed securities only if those to whom it
delegates the role of managing those dealings act with integrity. In the
context of what is said to investors, it is those directly involved in and, for
practical purposes, responsible for what should be said who are the relevant
persons. The question in this case is therefore whether Senior Manager A
was such a person.

194. It is clear from the evidence that the relevant decision in this case, which
was whether the announcement, prospectus and circular issued by Barclays
plc in relation to the October capital raising should disclose the fees payable
to QH under the October Agreement and their connection to the October
capital raising, was one in which Senior Manager A was instrumental.
Senior Manager A approved the wording of the announcement, prospectus
and circular. They did so in the knowledge that Barclays had not taken
adequate steps to ensure that the £280 million fee payable to QH under the
October Agreement was justified, and that there was therefore a risk that
the information contained in the published material was misleading, false
and/or deceptive and/or omitted matters likely to affect its import. In such
circumstances, the Authority considers that it would not be appropriate to
conclude that Barclays acted with integrity when Senior Manager A, to

whom Barclays had delegated key responsibilities in relation to disclosures
to shareholders and the market, failed to do so.

195. The Authority does not consider it to be problematic for the rule of
attribution applicable to Listing Principle 3 to be different to that applicable
to the criminal charges that Davis LJ was considering. Davis LJ’s judgment
did not concern regulatory provisions such as Listing Principle 3. On the
contrary, Davis LJ expressly pointed out that he was dealing with the
application of common law principles, and not with matters of a “regulatory
kind”.

Penalty

196. Barclays plc did not breach its regulatory obligations and therefore no penalty should
be imposed.

197. Alternatively, if the RDC considers that some, but not all, of the alleged regulatory
breaches have been made out then the proposed penalty should be reduced to reflect
the more limited breaches.

198. The Authority’s conclusions as set out in this Notice differ in certain respects
to those set out in the Warning Notice. However, given the seriousness of
Barclays plc’s failings as set out in this Notice, which include a failure to act
with integrity, the Authority considers that it remains appropriate to impose
a financial penalty of £40 million on Barclays plc. In reaching that view, the
Authority has had regard to the relevant penalty guidance, in particular the
factors mentioned in paragraphs 111 to 116 of this Notice.

Enforcement’s unfair approach to the case

199. The approach of the Authority’s Enforcement case team to this case has been unfair
to Barclays and is in breach of fundamental rules of natural justice.

200. The case concerns events that occurred in 2008. The inherent difficulties in
prosecuting historical cases has been unreasonably exacerbated in this instance by
Enforcement’s approach to its investigation, including: (i) its decision to materially
revise its case theory following Barclays’ written representations on the Warning
Notices given to Barclays plc and Barclays Bank; (ii) its decision to make new, very
serious allegations against various individuals in circumstances where those
allegations were never put to the relevant individuals; and (iii) Enforcement’s failure
to obtain during the course of its investigation evidence in support of its new case
theory.

201. Enforcement’s case has evolved, for example when Barclays identified areas of the
Listing Rules and the Listing Principles which had not been addressed in the case
documents, and Enforcement had to construe the evidence to meet this evolving
case.

202. Why Barclays is alleged not to have taken reasonable care was not set out in the
Warning Notice or the Investigation Report, and Enforcement only explained why in
response to Barclays’ written representations.


203. Certain interviews took place at a time when Enforcement’s case theory was different
to what it is now, and before Barclays waived privilege in certain documents, and so
some witnesses were not asked relevant questions or shown important documents.
This is particularly the case for Senior Manager A, who was interviewed before
Barclays waived privilege and was not re-interviewed.

204. Enforcement is therefore seeking to hold Barclays plc directly liable for Senior
Manager A’s alleged lack of integrity that is said to arise from matters that have not
been explored with them in evidence and in circumstances where they do not have
third party rights in relation to the Warning Notices given to Barclays plc and Barclays
Bank. Enforcement’s approach in this regard is unfair to Senior Manager A and to
Barclays plc.

205. To maintain its case theory, Enforcement relies on the evidence given by Barclays’
external lawyers at interview eight years after the events in question. However,
much of that evidence is inconsistent with the contemporaneous evidence to such a
great extent that it should be obvious that their memories are unreliable. The
contrary evidence offered by other witnesses, including Barclays’ internal lawyers, is
entirely consistent with the contemporaneous evidence. Enforcement has not offered
an explanation for such a preference.

206. At interview, key questions were not posed to Barclays’ external lawyers and key
documents were not put to them.

207. New evidence was introduced at a late stage resulting in significant evidentiary gaps.
Those gaps mean that, at the very least, there is significant uncertainty with the
evidence upon which Enforcement seeks to rely such that: (a) it cannot discharge
the burden of proof; (b) it cannot be satisfied that there is sufficient reliable evidence
for such serious allegations; and (c) to the extent that there is any doubt, it should
be resolved in favour of Barclays.

208. The decision to give Barclays plc this Notice has been made on behalf of the
Authority by the RDC, whose members are separate to the Enforcement case
team who conducted the investigation in relation to this matter and who
recommended that action be taken against Barclays plc. The RDC does not
consider that Enforcement’s approach to the case has resulted in Barclays
being treated unfairly.

209. The RDC considers it was reasonable for Enforcement to decide not to re-
interview Senior Manager A, since Senior Manager A had already made clear
their position in relation to the relevant matters in this case, including after
Barclays waived privilege. The RDC also does not consider that Enforcement
acted unfairly in making criticisms of various individuals; Enforcement was
entitled to make any points it considered relevant to the case, and the RDC
has had regard to them, and Barclays’ submissions in response, in reaching
its conclusions as set out in this Notice.

210. The RDC does not agree that Enforcement’s case against Barclays plc
materially changed following the issue of the Warning Notice given that the
rule-breaches alleged by Enforcement have, at all times, been those that
were set out in the Warning Notice. The only material developments in the
case since the Warning Notice was given to Barclays plc are: (a) that

Barclays decided to waive privilege in order to put forward a defence that
its conduct was lawful because it acted in accordance with its lawyers’
advice; and (b) that criminal and civil litigation since then has brought
additional evidence to light which Enforcement was required to analyse.

211. The RDC acknowledges that the reasons why Barclays plc is alleged to have
failed to take reasonable care were first set out in detail in Enforcement’s
response to Barclays’ written representations, but does not consider that
this caused any unfairness to Barclays as it was subsequently given the
opportunity to make further representations and did so.

212. The RDC recognises that the events described in this Notice took place a
number of years ago, and that some of the interviews took place several
years later. The RDC has taken this into account in reaching its decision to
give this Notice, and is satisfied that its conclusions are supported by the
evidence, including contemporaneous documents.