By Max Colchester 

LONDON--U.K. and U.S. regulators have begun an investigation into Barclays PLC Chief Executive Jes Staley over his attempts to unmask a whistleblower who raised questions about one of the bank's top hires.

The U.K.'s Prudential Regulation Authority and Financial Conduct Authority are probing both Mr. Staley and the bank over its treatment of whistleblowers after Mr. Staley tried to identify the source of an anonymous letter that criticized the new hire and Mr. Staley's previous dealings with him, Barclays said in a statement Monday. The bank added that it had issued a formal reprimand to Mr. Staley and would make a "significant" cut to his bonus. It is also conducting its own review into Barclays's controls.

The New York State Department of Financial Services, which regulates Barclays in the U.S., is also investigating the matter, according to a person familiar with the probe.

The hire in question was Tim Main, who was brought in from Evercore Partners to run Barclays's financial institutions group, according to a person familiar with the matter. Mr. Main had previously worked with Mr. Staley at J.P. Morgan Chase & Co. He declined to comment.

"I have apologized to the Barclays board, and accepted its conclusion that my personal actions in this matter were errors on my part," Mr. Staley said in a statement.

In June 2016, Barclays's board and a senior executive received anonymous letters raising "concerns of a personal nature" about Mr. Main, as well as Mr. Staley's "knowledge of and role in dealing with those issues at a previous employer," the bank said. Mr. Staley initially asked Barclays's internal security team to try to identify the authors of the letters, believing them to be an "unfair personal attack," the bank said. He was told that it wasn't appropriate to do so. But in July he followed up on the request, and the security team asked a U.S. law-enforcement agency to try to help. The whistleblower's identity was never revealed, the bank says.

A Barclays employee flagged the matter to the bank's board in early 2017. The board then commissioned its own probe and shared its findings with the U.K. regulators. Barclays said an internal investigation into Mr. Staley's actions concluded that he honestly, but mistakenly, believed that it was permissible to identify the author of the letter.

The probe is expected to take several months, according to people familiar with the matter. Punishments could range from a verbal warning to Mr. Staley's being barred from undertaking regulated activity, a step that would prevent him from remaining CEO. Barclays's board will await the regulators' findings before docking a chunk of his 2017 bonus. Last year, Mr. Staley was paid GBP4.2 million ($5.2 million).

The issue is another stumble for Barclays as it tries to overhaul its image after years of scandals. Mr. Staley has trumpeted the bank's values and brought in executives to upgrade its controls. "This latest revelation represents a very significant embarrassment for the board as it tries to rebuild the group's reputation," said Gary Greenwood, an analyst at Shore Capital.

Since his arrival in late 2015, Mr. Staley has refreshed the bank's management team, bringing in a series of new executives. Many of them were from his alma mater, J.P. Morgan. He has replaced the bank's chief risk officer, chief operating officer and the head of the lender's investment bank. Some within Barclays have grumbled that Mr. Staley wasn't giving insiders a fair chance and was leaning too heavily on J.P. Morgan, where he spent over three decades, holding a portfolio of roles including running its investment bank.

Mr. Staley left J.P. Morgan in 2013 after a management reshuffle. He joined BlueMountain Capital, a hedge fund that had profited a year earlier from the "London whale" debacle, which left J.P. Morgan with more than $6 billion in losses.

Barclays investors have warmed to Mr. Staley's plan to reinforce Barclays's investment banking franchise and refocus the lender on its U.S. and U.K. operations. The bank's share price has risen 43% this year.

Barclays Chairman John McFarlane said in a statement that he is "personally very disappointed" in Mr. Staley, but the board nonetheless said it supports his reappointment at the bank's annual shareholder meeting next month.

Write to Max Colchester at max.colchester@wsj.com

 

(END) Dow Jones Newswires

April 10, 2017 10:40 ET (14:40 GMT)

Copyright (c) 2017 Dow Jones & Company, Inc.
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