Strategic Shareholder Climate and Risk Financial Financial Barclays PLC 188 report information sustainability report Governance review review statements Annual Report 2022 Directors' report: Over-issuance of Securities – Shareholder Q&A To help shareholders understand the circumstances relating to the Over- issuance of Securities and remediation activity taken by Barclays to resolve this matter, we have set out below a series of questions and answers. Shareholders should refer to the underlying disclosures, including the Group’s results and stock exchange announcements, for more information about the matters discussed below. The Review further concluded that the Where did the Over-issuance of What was the legal significance of occurrence of the Over-issuance of Securities occur? the Over-issuance of Securities? Securities was not the result of a general The securities issued in excess of the The Group operates a structured products lack of attention to controls by Barclays, business in BBPLC, through which it issues registered amounts were considered to be and that Barclays’ management has structured notes and exchange traded ‘unregistered securities’ for the purposes consistently emphasised the importance notes to customers in the US and of US securities law and certain offers and of maintaining effective controls. elsewhere. In order to issue securities of sales of these securities were not made in What was the Board’s response? this nature in the US, BBPLC maintains a compliance with the US Securities Act of The Board has worked to address the root shelf registration statement with the US 1933, which requires that offers and sales cause and impacts of the Over-issuance of SEC. of securities be registered unless there is Securities, including through the Review, an exemption from registration. This gave What securities were over- and deeply regrets its occurrence. The rise to rights of rescission for certain issued? Over-issuance of Securities also purchasers of relevant securities under US In March 2022, management became underlined to the Board the need to securities laws, whereby such purchasers aware that BBPLC had issued securities continue to focus on embedding Barclays' had a right to recover either, upon the materially in excess of the amount Values and Mindset at all levels of the tender of such security, the consideration registered under BBPLC's shelf organisation to achieve operational and paid for such security (together with registration statement on Form F-3, as controls excellence. Further, the Board has interest but less the amount of any income declared effective by the SEC in August supported the creation of a Group-wide received), or damages if the purchaser had 2019 (2019 F-3). The amount registered programme, established by the Group sold the security at a loss. As a result, should have operated as a limit on the Chief Executive. This programme will seek BBPLC elected to conduct a rescission amount of BBPLC’s issuances. to identify issues and lessons learned offer, as approved by the Board, to eligible Subsequently, management also became across the Group's remediation initiatives purchasers of relevant securities. The aware of issuances in excess of the to help ensure that Barclays is consistently rescission offer was launched on 1 August amount registered under BBPLC's prior excellent, in customer and client service, in 2022 and settled on 15 September 2022. shelf registration statement (the operational capability and in financial Why did the Over-issuance of Predecessor Shelf). Across both shelf performance, with all activities registration statements, BBPLC issued a Securities happen and what were underpinned by a strong risk management cumulative total of approximately $17.7 culture. the findings of Barclays’ review? billion in securities in excess of the Barclays commissioned a review led by What actions has the Board taken amounts it had registered with the SEC. external counsel of the facts and in response to the Over-issuance circumstances relating to the Over- Why did BBPLC’s US Shelf have of Securities? issuance of Securities and, among other limited capacity? The Board spent significant time matters, the control environment related In May 2017, Barclays Capital Inc. entered throughout 2022 in both scheduled and ad to such issuances (the Review). The into a settlement with the SEC in hoc meetings considering the impacts of Review concluded that the Over-issuance connection with a matter arising out of its the Over-issuance of Securities and the of Securities occurred because Barclays former Wealth and Investment Group’s response to it, including through did not put in place a mechanism to track Management business. As a result, at the the work of its Risk and Audit Committees. issuances after BBPLC became subject to time the 2019 F-3 was filed and the This work has included the following: a limit on such issuances, as a result of Predecessor Shelf was amended, BBPLC losing WKSI status. Among the principal • the assessment of the financial impacts had become an ’ineligible issuer’ thereby causes of the Over-issuance of Securities of the Over-issuance of Securities and ceasing to be a 'well known seasoned were, first, the failure to identify and the associated hedging arrangements issuer' (or WKSI). This meant that BBPLC escalate to senior executives the undertaken to help manage the risks was not able to take advantage of SEC consequences of the loss of WKSI status associated with the rescission offer and rules that allow WKSIs to file shelf and, secondly, a decentralised ownership Barclays’ financial exposure registration statements to register structure for securities issuances. unspecified amounts of securities (and • the review and approval of disclosures then issue securities without limit), and was to the market regarding the Over- instead required to pre-register a fixed issuance of Securities amount of securities under its shelf • considering the findings of the Review registration statements and only issue and, among other matters, the control securities up to that amount. environment related to such issuance