Barclays Bank plc and a former trader from its distressed debt desk today agreed to penalties with the U.S. Securities and Exchange Commission over allegations of illegal insider trading.

The bank will pay US$10.9 million to settle the charges, and the trader will also pay US$750,000, after the SEC filed a civil action against them. Barclays and Steven Landzberg, former proprietary trader for Barclays’ U.S. Distressed Debt Desk, were named in the complaint, filed in the U.S. District Court for the Southern District of New York, alleging that Barclays and Landzberg engaged in securities fraud through a pattern of illegal insider trading.

According to the complaint, Barclays and Landzberg illegally traded millions of dollars of bond securities over 18 months, while aware of material nonpublic information received through six creditors committees. Landzberg simultaneously served as Barclays’ representative on the creditors committees and as its proprietary trader. He signed confidentiality agreements and committee bylaws on Barclays’ behalf, and received material nonpublic information concerning the financial condition and prospects of the issuers.

Barclays and Landzberg each consented, without admitting or denying the allegations in the commission’s complaint, to entry of final judgments permanently enjoining them from violations of securities laws. To settle the commission’s insider trading charges, Barclays also consented to entry of a court order requiring it to pay over US$10.94 million: disgorgement of US$3,971,736, prejudgment interest of US$971,825, and a civil penalty of US$6,000,000. To settle the commission’s charges against him, Landzberg consented to be permanently enjoined from participation in any creditors committee in any federal bankruptcy proceeding involving an issuer of securities, and to pay a civil penalty of US$750,000.