UPDATE 2-Barclays called reckless over $511 mln payments to Qatar investors
* UK regulator plans to fine bank 50 mln for disclosure failings
* Barclays says contests FCA's findings
* Barclays income down 500 mln stg July-Aug on weak investment bank
LONDON, Sept 16 (Reuters) - Barclays has revealed a watchdog's finding that it acted recklessly in failing to disclose payments of 322 million pounds ($511 million) in advisory fees to Qatari investors who helped bail it out during the credit crunch.
In its prospectus for a 5.95 billion pound ($9.4 billion)share issue, the British bank said the Financial Conduct Authority (FCA) planned to fine Barclays 50 million pounds for its failure to adequately disclose the fees.
The payments were made under "advisory service agreements" linked to Barclays' emergency fundraising with Qatari investors, which helped the bank avoid taking a taxpayer bailout in 2008.
Barclays said it was fighting the findings.
The FCA, which declined comment other than to confirm its findings, had issued the warning notices to Barclays last week, included notification of the financial penalty, the prospectus said.
The FCA and the UK Serious Fraud Office (SFO) have been investigating for about a year the circumstances surrounding Barclays' controversial fundraising from Qatar in 2008.
Qatar Holding invested 5.3 billion pounds in the bank in two fundraisings, which helped it avoid the government bailouts that were forced on rivals Lloyds and Royal Bank of Scotland .
Barclays had already been criticised by shareholders for the lucrative terms given to Middle East investors who bailed it out. It had said it entered an advisory services agreement in June 2008, but had not disclosed the fees payable.
Barclays' prospectus also said its income in July and August fell by 500 million pounds from a year ago as revenue in its investment bank was significantly below the previous year.
The weak trading was mainly in its fixed income, currencies and commodities division and left adjusted income for the eight months to the end of August down 5 percent on the year, the bank said.
Barclays said it could also lose C$500 million ($484 million) from a dispute in Canada related to the sale of credit default swaps. Barclays lost a court case against Devonshire Trust, an asset-backed commercial paper trust, two years ago and in July the Court of Appeal for Ontario dismissed its appeal.
Barclays said it was considering its options.
Barclays launched its rights issue of new stock to plug a 12.8 billion pound capital shortfall identified by Britain's regulator in July.
It is offering shareholders one new share at 185 pence for every four they own. The bank expects the new shares to start trading on Oct. 4.
"Barclays continues to remain cautious about the environment in which it operates and its focus remains on costs, capital, leverage and returns in order to drive sustainable performance improvements," the bank said in a brief trading update.
Daily income for its investment bank so far this month was ahead of July and August but below September 2012, it said.