Barclays filed a motion on Thursday to dismiss a lawsuit brought by New York State’s attorney general that accused the bank of lying to customers of its private stock market.
Barclays, in its first legal response to the accusations filed last month, argued that its customers were sophisticated enough to understand that “glossy marketing brochures” about the private market, known as a dark pool, did not reflect its actual composition. The bank said the attorney general, Eric T. Schneiderman, used documents in misleading ways to draw inaccurate conclusions about high-frequency trading.
The bank also argued that Mr. Schneiderman overstepped his legal authority in bringing the lawsuit under the Martin Act, a powerful law that sets a relatively low bar for proving fraud. The response was filed in New York State Supreme Court in Manhattan.
“Barclays works closely with its regulators in all jurisdictions and will continue to cooperate with the New York attorney general,” a Barclays spokesman, Mark Lane, said in an emailed statement. “However, we do not believe that this suit is justified, and we have a duty to our shareholders, clients and staff to defend our position.”
Mr. Schneiderman, the state’s top law enforcer, contended that Barclays favored high-frequency traders over other investors in its dark pool, known as Barclays LX. He contended Barclays falsified marketing materials, inaccurately portraying the concentration of high-frequency traders in the market, and he said the bank misrepresented a service that purported to protect investors from predatory trading behavior.
The lawsuit used internal Barclays documents to argue that the bank privately acknowledged a greater level of aggressive trading than advertised. It also quoted from emails in which Barclays employees discussed taking “liberties” in marketing the dark pool.
But Barclays, in its filing, contends that the advertised metric cited in the lawsuit was of a different type than the internal metric, and that the comparison was erroneous.
Barclays further argued that its customers would know not to trust the marketing materials because they were “highly sophisticated traders and asset managers” who used “extensive data” to make decisions.
In response to an accusation in the lawsuit that a Barclays employee was fired after refusing to withhold a trading analysis from a large investor, Barclays argued that the employee was already scheduled to be laid off.
Using a more technical argument, the bank also challenged the lawsuit on legal grounds. Barclays argued that the Martin Act, which covers the sale or purchase of securities, did not apply because the customers were simply buying services and access to the market.
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